This article first appeared on the NationaLease blog.
Logistics is more than getting from here to there. Following these five steps can lead to increased efficiencies and reduced costs.
How important is the science of logistics? Without it, D-Day, and the resulting triumph of the Allies, could have instead been an incredible failure. This logistics marvel involved millions of tons of supplies, thousands of ships, and hundreds of thousands of personnel. And all of it had to be at the right destination at exactly the right time. As General Brehon B Somervell, Commanding General Army Services Forces in 1942, said, “Good logistics alone can’t win a war. Bad logistics alone can lose it.”
Fortunately, for most companies that deal with transporting product to a destination, it may not be a matter of life and death; however, it can be a matter of success over failure. Logistics has changed dramatically over the past two or three decades, with responsibilities that often go well beyond transporting goods from one place to another. Technology, globalization, and the rise of e-commerce have all contributed to this transformation. That’s why it’s imperative that companies implement best practices in their logistics operations. Regardless of all of the elements logistics is involved with, the reality is that transportation is often the costliest portion of a company’s logistics practices. So finding better, more efficient, and more cost-effective methods can make a major difference in the ability for a company to adhere to its budget. There are a number of things companies can do, but these five best practices should make an immediate and noticeable difference in your bottom line and in your ability to better service your company and your customers.
- Consider alternative delivery methods for non-time-sensitive shipments – When you have a tight deadline, meeting that timeframe is essential. However, if you have shipments that are not time-sensitive, you should consider using Less-than-Truckload or Intermodal transportation. By using a combination of modes, you can find those that will get your shipment to its final destination, but at a lower cost.
- Use pool points or multi-stop consolidation strategies – Instead of sending small shipments to separate customers in the same area, aggregate those small shipments into one full truckload and ship them all to a common area (pool point). From there, the products can be off-loaded into separate trucks for their final destination. Those trucks will be much closer to the final destination and that will result in fuel cost savings.
- Convert hourly pay structure to activity-based compensation for increased productivity – Driver pay and fuel costs are the two biggest shipping costs, so finding better methods for both is essential. When drivers are paid hourly and overtime, there is no incentive for them to be more efficient. A longer drive time means more pay. Instead, paying by the mile and/or stop incentivizes a driver, since he or she will get the same pay, whether it takes them eight or ten hours. Not just a driver advantage, this best practice also helps the company, since a truck that’s returned early can be used by another driver, thus increasing the utilization of that asset.
- Analyze whether adding a cross-dock or distribution center will benefit response time – In today’s global economy, customers expand their presence, resulting in what is called geographic creep. This makes it necessary for companies to service customers further and further away from their distribution center (DC) or plant. As an option, companies should assess the costs of supporting their customers through existing facilities and compare that to the cost of locating another facility closer to those customers that are the farthest away. If the cost of setting up additional facilities makes sense, the additional benefit will be a decrease in response time and an increase in customer good will.
- Re-align accounts with the proper facility when entering a new market or adding a new customer – Once your business expands, it’s a good move to look at mapping your existing facilities with an overlay of your new customers or markets. You can see whether it would be valuable to add a new DC or plant where it could service this new business or simply put additional trucks in the existing facilities. You may find that current customers can be better served by one of these new facilities rather than leaving the status quo in place.
In a customer-centric world (whether it’s B2B or B2C), success depends on customer satisfaction. But pleasing customers shouldn’t result in lost time and money for your company, so instituting smart logistics practices is key