Logistics is a big part of any small business, in terms of cost and customer satisfaction. If a small company can master logistics, it will gain a significant advantage against competitors with inferior logistical efficiency — even sizable competitors. How is it done?
Logistics Starts With the Right Team
Logistics is like any other facet of business: You can only be as good as your people. Small businesses have two fundamental options for developing the logistics side of their business; they can do it internally or partner with a third-party logistics company (3PL).
For internal development, it’s important to have people in key management roles who have experience managing logistical functions for organizations with volume of which you aspire; who have been where you want to go. Logistics requires expertise in logistics software, material handling, packaging, transportation and warehousing. Depending on your shipping volume, you’ll be looking for one person to manage all areas, or perhaps two people to share the load.
Outsourcing logistics to a 3PL has many advantages:
- Outsourcing enables you to achieve big-business logistical efficiency quickly.
- It enables you to focus on your core business.
- It puts you in a position where you can scale logistics seamlessly as your business grows.
- It gives you potential to quickly branch out into new value-added services, such as kitting, fulfillment and dedicated warehousing.
The key for outsourcing, then, is to select the right 3PL, and the list above provides many of the answers to your needs.
To select the right 3PL for your small business:
- Your 3PL should be able to integrate with your internal systems easily.
- Your 3PL should have experience in all of the logistical work you need done or foresee needing to be done.
- Your 3PL should be focused on companies of your size, but also on companies whose logistical demands are similar to what you foresee needing in three to five years.
- Your 3PL should offer additional services that would interest your customer base.
- Additionally, any 3PL you consider should be financially sound, have a strong reputation, and have personnel you feel comfortable working with on a daily basis.
Set Up for Success
Having the right logistics team is important, but without a solid plan and clear objectives, all of your expensive talent will be wasted. It is critical to set documented standards of performance that your entire logistics team is committed to maintaining. Important standards to define include:
- Delivery time — from order placed to order received
- On-time final delivery percentage
- Shipping costs as a percentage of material cost
- Freight cube and weight utilization
- Freight claims — frequency and amount
- Order accuracy percentage
- Backorder percentage
- Inventory accuracy
- Inventory turns
- Storage space utilization
- Inbound (dock-to-stock) efficiency
- Safety performance
The specific numeric goals for these categories of performance will be unique to your business, and a lot of thought needs to go into it. Questions for your business to consider:
- What level of performance is considered acceptable in our industry? For instance, if delivery time in your industry averages 10 days and customers are content with that, it may be a waste of human and financial resources to set your sights on three-day delivery.
- Can we get a competitive edge by crushing the industry average? If you haven’t thought of logistics as marketing — think again! Is there a level of logistical performance that could attract many new customers and keep current customers onboard forever? For instance, if you could fill orders 99.9 percent complete in an industry where 90 percent is the accepted norm, would that make you a truly formidable competitor?
- What are the keys to bottom-line performance in our operation? If you sell pillowcases, space utilization may not be the most important thing; but if you sell pillows, it may be everything. Or again, if the costs associated with incorrect orders are shredding your bottom line, then order accuracy should be high on your priority list.
With the right team and the right priorities, your business will have a solid foundation to support high-quality execution. Plan carefully — then watch your business grow!
Curtis Campbell is Vice President of Operations and Account Management at Unyson. Campbell is responsible for the operational execution and excellence for Fortune 500 manufacturing, and retail and consumer packaged goods clients. Prior to becoming Vice President, Campbell was Senior Director of Operations — with 12 years of progressive experience in logistics, freight management, and execution in manufacturing, retail and distribution.