The Four Key Goals for Successful Logistics
To create an effective supply chain in a multichannel operation, we believe there are four key goals:
1) Increased efficiency
2) Improved customer service
3) Increased sales
4) Improved relationships
Each of these goals includes definitive and specific objectives. Here are some of our thoughts on best practice to help you achieve those objectives. We believe successful business is based on partnerships, with nearly 25 years of industry experience, Barry Broughton, our Operations Director is happy to discuss individual business requirements and make recommendations for the best freight forwarding and logistics solutions for your business. Contact us for more information firstname.lastname@example.org +44 (0)1622 237 979
1) Increased efficiency
To increase supply chain efficiency, a company must develop cost-effective transportation rates while reducing overhead, total inventory, and overall cost-per-order processing. You can improve your warehouse solutions, including processes, layout, and flow, by working closely with your transportation provider. Establish a two-way relationship with your carrier to frequently share best practices, issues, and opportunities.
When importing/exporting products trust an expert, use experienced account managers who understand freight, logistics and customs procedures, this saves time and cost in the long run. For example, if a product doesn’t meet specifications, it must be double-handled, possibly repackaged, stored, and shipped back to the source. This process uses extra labour and space. What’s more, lack of a reliable delivery time requires you to carry more inventory.
Another way of improving efficiencies is to consider having the vendor perform value-added services such as packaging, marking, and quality inspections. This improves the chance of errors being caught at the source; source-based services speed product flow through the warehouse.
Avoid making transportation an afterthought; try to build it into the fulfilment and facilities process, consider inbound and outbound deliveries, timing, access, pre-planned and consolidated shipments, local courier services and the capability to fulfil orders later in the day to increase customer service.
Traditionally vendors, rather than merchants, have controlled inbound freight decisions. This practice costs merchants an estimated premium of 20%-60% above actual transportation costs. But today more merchants are taking control of inbound freight, enabling them to influence their economies of scale and negotiating power to reduce costs. This is not an easy transition to make when you consider the number of documents, parties, languages, and currencies involved in global sourcing. But the benefits are numerous — lower costs, improved visibility of the inbound goods in transit, and the ability to schedule receipts. This is where a good logistics partner can really add value, handling this process, negotiating the best costs, using multimodal transportation options to fit your timescale and budget, therefore allowing you the time to concentrate on the other areas of your business.
2) Improved customer service
Lifestyle and leisure markets are now very competitive, and companies must be able to deliver the online or in-store experience customers now expect. This means fulfilment – inbound and outbound transportation is key to delivering the shipment on time and in good condition.
In direct marketing, customer service must be balanced with costs. The first cost is acquiring a customer, which is roughly £7-£18, depending on the efficiency of the prospecting. This figure includes advertising and other marketing costs, as well as the cost of nonresponses. In many businesses, up to 70% of all first-time buyers do not purchase a second time.
The second cost element to consider is the high cost of holding backorders. Hundreds of customer studies show that in most direct businesses it costs £5-£9 to process one backordered unit of merchandise.
The third type of cost is customer returns and cancellations. Returns also cost far more than orders to process, and in many businesses, only one-third of the returns are exchanges.
For high-return categories and businesses, reverse logistics services typically allow customers to send returns into the pipeline closest to their location, either at home or via a retail outlet. The reverse logistics provider should offer systems that provide visibility of goods being returned in advance. This will not only allow the merchant to schedule resources accordingly, but it will also give the merchant an estimate of return goods that will be available to fill new customer orders.
The speed of getting resalable returns back into inventory and the reduction of returns costs can greatly affect profitability. Leading merchants acknowledge returns as part of the cost of doing business and include a convenient return process as part of the customer experience.
On the inbound side, shaving several weeks off transit time can save some of the backorder costs and reduce loss of customers. The use of multimodal freight – combined journeys utilising sea, rail and road networks reduce sea freight travel time and are cheaper than air freight.
Getting efficient inbound logistics and fulfilment systems in place is the first priority for any retailer. Permanently losing a customer because of poor service has the highest cost to any business.
3) Increased sales
Inbound and outbound logistics and transportation can help retailer’s sales, several opportunities exist for improving service, and those in turn can be used to marketing’s advantage. Look at inbound and outbound freight as separate operations with separate requirements. Bundle the volumes wherever possible with your carriers, but recognise the differences between the channels.
Firstly, inbound logistics – with direct promotions and advertised retail products, maintaining on-time and in-stock position is a must. Without an available, reliable source of merchandise, you could end up losing sales and customers. Because it’s difficult to project sales, you need to get product quickly and safely into the logistics pipeline. Reducing product damage from inbound transportation is also important as it can seriously reduce product availability.
Begin by tracking what you have coming inbound–where it is and when it will be delivered. Import and assemble containers of priority product, since delivery by air freight is costly and may exceed the margin of low-priced product.
Use trustworthy and reputable carriers – the logistics of delivering to the customer can hurt sales if the customer’s expectations are not met–for example, if a gift is delivered late or arrives damaged, or the customer doesn’t want the product that arrives, returns increase the cost of operation.
Outbound logistics can also be a contributing factor in a sales marketing plan if transportation costs are under control. According to BizRate Research, 79% of e-commerce companies plan to offer free shipping. Free shipping has proven to increase sales and average order sizes. Most marketers don’t want to give up this source of revenue, though, or they offer it only to their best customers or higher-average order buyers. But if your company’s transportation costs are out of control, you’re going to be less able to offer shipping promotions.
4) Building relationships
True two-way collaboration between retailer and carrier is key to the success of logistics execution. Measures of success are total cost, time in transit, and responsiveness of the carrier representative.
The single-carrier vs. multicarrier is one of the primary issues you need to address. Using one carrier allows a higher aggregate volume of shipments, which can result in lower negotiated rates. The downside is total dependence on the carrier and possible problems if there is a carrier service interruption.
Working in partnership with a good logistics or freight forwarding company helps with all of these issues, acting as a one stop shop. At TPS Global Logistics we operate as an extension of your business, providing freight forwarding, fulfilment, warehousing, distribution, same and next day courier services in the UK, Europe and worldwide. It is our job to have good relationships with all carriers. Inevitably with transportation there will be issues that must be addressed. Trust and a positive attitude can influence how those issues are resolved.