There are several elements in an effective logistics strategy, with the ultimate goal of identifying the most cost-effective service levels and developing plans and processes that enable the company to operate as close to those optimal service levels as possible. Logistics is one component of the overall supply chain and is impacted by supply chain changes. At the same time, an effective logistics strategy can improve supply chain management and overall supply chain performance. As such, an effective logistics strategy must be flexible enough to adapt to the ever-evolving supply chain to sustain optimal service levels.
Statista found that 73 percent of buyers and users of freight transportation and logistics services say the COVID-19 pandemic had an impact on their logistics and supply chain operations. What’s more, PwC’s Global Crisis Survey found that 69 percent of business leaders said their companies experienced at least one corporate crisis within the past five years. Whether it’s a corporate crisis limited to your organization or a global pandemic with worldwide effects, companies with logistics strategies that include contingency plans and adaptability are best-equipped to weather these storms.
With an effective logistics strategy, companies can deliver the right products to the right customers at the right time, at the highest quality and the lowest possible cost. However, variables such as customer demand and transportation costs can differ based on market conditions, so companies may develop distinct logistics strategies for specific customer segments, geographic regions or product lines. For instance, expanding to a new geographic market may require a unique logistics strategy to account for higher transportation costs or regional customer demands.
There are many factors to consider when developing a logistics strategy, such as:
Software, such as warehouse management software and data analytics solutions
Transportation systems, including planning efficient delivery routes, cost-effective packaging and modal options (air, rail, etc.)
Performance measurement and improvements, including identifying key performance indicators (KPIs), goals and implementing measurement systems (tools and software)
To learn more about the essential ingredients for an effective logistics strategy, we reached out to a panel of logistics professionals and asked them to answer this question:
“What’s the single most important ingredient in developing an effective logistics strategy?”
James Ford is the Co-founder of AutoBead premium car care and in charge of their day-to-day logistical operations. James has served as the Head of Logistics for two charities which emerged to relocate surplus PPE into the hands of frontline NHS staff.
“The secret to a good logistics strategy is maintaining a continuous search for systemization…”
Every business is unique, whether it is the product, its location, its suppliers, its customers or its people. The objective is always to assemble goods to meet the customer’s request and get it to them in the most efficient and safest way possible. Once you’re able to systemize the process, which means each component is well-defined and could be transported to new locations without causing disruption, then you have implemented a great logistics strategy that won’t cause any business continuity issues.
One of our founders faced a recent challenge when placed in charge of logistics for the newfound charities National Equipment Appeal Database and SHIELD, which were purposed to find PPE that could be donated and relocate them to frontline staff in the National Health Service. The charities began by offering a peer-to-peer service, allowing donors to deliver or recipient requesters to collect the goods. However, this logistics model meant that many donations went unused as there was not a suitable local match for the goods, so the charities moved to a more structured logistics model. Donations would be collected by a logistics partner, DHL, and delivered to a central stocking center, which organized the goods into stockpiles of each product type (FFP1, FFP2 and FFP3 masks; small, medium and large gloves, etc.), providing a stock count to a “Requests team.” The requests team would speak to those making requests for PPE and deliver the goods via our service provider, Parcel Force.
Each component of the logistics process was structured, and new team members could be trained on it easily. The model enabled the charities to move millions of items of PPE for generous donors who did not require it at the time and get it into the hands of those that needed it most, our frontline NHS staff.
“The most important ingredient in developing an effective logistics strategy is…”
Having a good logistics architect that understands all the possibilities and opportunities that are available for the specific industry. From personal experience, I have learned that my knowledge can be limited to only one strategy because my experience is limited to my own companies. Hiring someone that has developed logistics strategies for 100-plus companies and knows all the ins and outs will save you a lot of time and money. Consult with someone with experience and knowledge of all the possibilities that are out there and will take into account what will make the most sense for the individual business and will be most cost-effective.
Jake Rheude is the VP of Marketing for Red Stag Fulfillment. He is passionate about tech solutions that take their work to the next level, especially in regards to marketing.
“New technology is impacting every aspect of the business world, and that includes the world of logistics…”
New technology is the fastest and most effective way to create an effective logistics strategy in today’s world. If you can use new technology to enhance communication with suppliers, manufacturers and more, you will have a tighter grasp on everything that is happening around your company.
Technology can also help you track trucks and packages and even plan in the long-term, compared to only planning for what is happening now.
The latest tech will help companies get a leg up on competitors that fail to adapt to the benefits it can provide. If you find you are being left behind by a competitor in a certain area, then find a tech solution that will push your operations to the next level.
Alex Azoury is the Founder and CEO of Home Grounds.
“In my experience, the most important ingredient in logistics strategy is making use of automated technology…”
Be willing to take the time to update systems and processes. Spending just a few days or a couple of weeks integrating automation that will improve your process efficiency for years to come is worth the investment.
Train your employees on how to utilize that automation, and your logistics will become reliable and efficient. Spending time investing in your team will give you a return even the best automation can’t match.
A second important ingredient of successful logistics is planning for failure. There will always be slip-ups and mistakes, missing products or lost paperwork. Create a system to cover those inevitable pieces of your ideal logistics plan, so you can remain successful and efficient.
“The most important piece in making logistics effective is to ensure you are prepared with a fall-back plan…”
A key strategy in the logistics field is that a plan B, and often a plan C, will allow you to flex with the inevitable failures that come with the territory in logistics.
There will always be failures, mistakes, missing products, etc. in the logistics industry. And your ability — as a business owner or operations director — to pivot and solve those problems with a backup system you’ve already designed will set you apart as a top dependable logistics operator.
Another important strategy to integrate into your business logistics is to have exact costs calculated. This strategy particularly applies to international shipping, where rates vary wildly. Establishing relationships with reliable shipping companies will allow you the freedom to count on them to charge you the correct rate for the country you’re delivering to.
Peter Christian
Peter is the founding partner and president of espi, a business consulting firm in NE PA. He has worked with 300+ clients in manufacturing, IS selection and implementation and project management. He authored the Amazon bestselling business book, What About the Vermin Problem, and is published in various professional magazines, including Consulting, Inc. and Design 2 Part.
“The most important first step in developing an effective logistics strategy is to establish what your overall product demand will be…”
Establishing product demand is done by identifying what the current and future needs (3 to 5 years) of your customers are. You can do this by taking the top 20% who probably account for 80% of the overall volume and extrapolating to get totals. Or, you can take the current volume and assign growth percentages (by product) for each of the years to arrive at volumes for each year.
You must also determine what new products and/or product lines will be introduced and which of the current products will be eliminated, including quantities for each year. The quantities for the spaces of time will dictate how your logistics will need to be structured.
Once you have established these parameters, you can now plan for things such as:
Suppliers for types of materials, how many are required when and what the specific delivery needs are.
Inventory requirements for all raw, WIP and finished goods.
Storage needs for all raw, WIP and finished goods. These include types of storage such as racking, shelving and bulk and climate control if required.
Establishment of production capabilities to make goods as close to delivery as feasible.
The number and locations of required warehouses, distributors, etc.
Distribution means covering daily, weekly and monthly receipts and deliveries.
Without having a solid initial foundation, you are throwing darts at an unknown and unseen target. There are many models that can then be used to develop the remainder of the strategy, but it starts with knowing what will be needed and when it will be required.
Jonathan Bass is the CEO and Founder of Whom Home.
“Successful businesses today hinge only on logistics…”
The cost of logistics is such a large part of delivering goods and services to your consumer that it actually needs to be the first problem you solve in supply chain management. Your product could cost less than the logistics cost to get it to the consumer or customer. The benefit today is there are many options in logistics to analyze.
James Lewin is the E-Commerce and Operations Manager at Bring Me Drink.
“The most important step in developing an effective logistics strategy is ensuring that you’re able to effectively pivot to and use the latest technology available…”
This is often where companies fall behind. They get stuck in their ways and don’t invest in the technology that could put them ahead of their competitors. Whether it’s a piece of hardware or a software package, being able to pivot easily into using a new process and tool could mean that you’re way ahead of the curve and overtaking your competitors.
If you’re able to utilize a better software that integrates nicely with your website and app at the same time, you could cut times between order placement and receiving the order. It might only cut minutes off the process, but if each order now takes 3 minutes rather than 5 to send from your site to your fulfillment software, for example, and you have 500 orders in the day, you’ll be removing around 16 hours of waiting in total:
500 orders x 3 mins waiting time = 1,500 mins waiting time total
500 orders x 5 mins waiting time = 2,500 mins waiting time total
2500 – 1500 = 1,000 mins difference
1000 min / 60 = 16.66 hours
Small changes like this can mean the difference between running efficiently and losing out on revenue. Even though it seems like shaving 2 minutes off of an automatic process is a minimal change, it can add up to a huge benefit as time goes on. This goes for most companies, whether you’re in logistics or you’re an e-commerce site.
The bottom line is, don’t be afraid to try new software and test different processes. At one point, the technology that you use today was brand new, and now it is the norm. Don’t let the fear of technology moving on hold you back.
Alex Deutsch
Alex Deutsch is the CEO at OasisTile, an online store for tiles.
“The most important element in an effective logistics strategy is connection…”
Whether it’s a small business or a big company, it is necessary to have a reliable channel to connect with manufacturers, suppliers and distributors, irrespective of their location. There must be a consistent technical solution to get connected with all the people and entities in the network. The connection ensures transparency in business and ensures that all individuals in the supply chain are on the same page to achieve objectives.
“Something that any good logistics strategy needs to have is an easy way to make it scalable…”
By making your logistics strategy an easily scalable process, you’re much more likely to succeed as time goes on and you get busier. As the orders come flooding in, you might find that you have to quickly expand your operations to make sure that you’re able to deal with the upswing rather than struggling, resulting in bad reviews and unfulfilled orders.
To make sure that your operation is scalable, you could do a number of things. For starters, begin building your company on good foundations. These foundations might include the company’s values, the ethos or even the first few people that you hire. The strength of a company’s foundations are going to decide where it will go and how far. So if they’re good, you can be sure that you’re going to build something successful.
You may also want to automate as much as you can. By using the right automation in the right areas of your business, it’s much more likely to become a scalable asset due to the fact that you’re more likely to run a lean operation and stay efficient. What’s more, you won’t necessarily have to hire additional staff; you may be able to simply run a few more orders through your automation or add capacity to the automation as needed.
Michael D. Brown is the Director of Fresh Results Institute. He is a Senior Global Management expert known for driving results through (and with) companies, organizations and academia. He has been responsible for the transformation of many businesses, from amateurs to top performers in their space.
“Automation is the single most important ingredient in developing effective logistics in a contemporary business space…”
Automation has never been this important to maximizing the efficiency of a logistics strategy. An increasingly IT-focused world is aggressively installing automation as the most crucial stakeholder in business process optimization. The good news is that today, there are admirable swathes of software that make the logistics process unprecedentedly seamless. To give you a more vivid picture, you can readily leverage software to provide you with real-time tracking of goods on transit, lavishing you with dynamic updates. This way, the client and the operator are completely on the same page (even up to being on the same line of the page) regarding crucial details like goods being dispatched, warehouse goods procurement and delivery at arranged destinations. It builds critical resilience into the logistics process, eradicating manual interference. Indeed, this will prove to be a lifesaver regarding the bulk of time it saves you, amplifying the efficiency of your process management. Undoubtedly, this will push up productivity.
A close sibling of automation that I see rampantly playing a more critical role in the logistics system is smart manufacturing. Today, we are seeing more players adopting smart factories — and with good reason. With smart manufacturing, stakeholders in a logistic system can maximize data and super-intelligent sensors. This latest smart manufacturing wave sees an encompassing integration of GPS technology that allows for the fluid and accurate reportage (or tracking) of employees, assets, inventory and vehicles. Therefore, it is unsurprising that more manufacturers today are leveraging intelligent sensor data to extract more critical information on the status of fleet trucks and shipping locations, as well as logistic flow to retail stores, distribution spots and warehouses.
“The most important ingredient in developing an effective logistics strategy is cost to serve…”
As a business owner, it is crucial to understand the cost to serve of every single product, which will help effectively build the whole logistics strategy around this point.
It is a large problem if a business does not properly analyze the cost to serve of every single product. A lot of times, the price of the product does not even cover the cost to serve, which highlights the importance of knowing the cost to serve for each product.
On one hand, you might think that it is easy to calculate. On the other hand, from my 10 years of experience analyzing our customers’ results, at least 15% of products are not profitable due to incorrect supply chain calculations.
So, if you have not gotten to this stage of analysis in your company, if you have not calculated the cost to serve of each product, then it’s likely that at least 15% of your products are unprofitable.
“The most important ingredient in any effective logistics strategy is to analyze warehouse operations…”
Are they set up to lower costs and maximize employee productivity? Is your staging process as effective as it can be? Ask yourself any other questions you can think of which will improve capability. It’s as simple as that.
Ryan is the Founder of Bead the Change. Bead the Change creates handmade bracelets that benefit the environmental issues affecting our world today. A portion of the sales for each bracelet goes towards supporting an organization that tackles issues that affect our world today.
“Logistics strategy is about finding that perfect balance of customer satisfaction and business profitability…”
You should be on top of each of the aspects that comprise warehousing and inventory control. Order processing, delivery scheduling, cost analyses and contingency allowances should be part of the standard operating procedure when it comes to logistics strategy.
Co-Founder and CEO of Omni, Inc. Manny is the consummate marketing and information technology professional with over ten years of experience in the fast-evolving arena of direct response marketing. Early on his career, Manny quickly became the master marketer mind behind the most successful lead generation campaigns for some of the top fortune 500 companies in the insurance, finance and education spaces. Manny loves to travel all over the world and write about his experiences on his personal blog, Embarky.io.
“The key ingredient in developing an effective logistics strategy is to adopt the latest technology and innovative approaches such as…”
Cloud technology, track and trace technology, use of truck scales and voice technology in your logistics processes. Keep an eye out for new developments, such as 3D printing, that have the potential to be a game-changer in the future. While doing that, you need to also focus on connectivity. You should design a logistics strategy in a manner that connects you to the suppliers, corporations and manufacturers that are situated in various parts of the world. You should have the technology to link all the entities in a way that offers consistency, enhances visibility and streamlines processes so that you can meet challenges in real-time. Make sure that you use solutions that can deliver to everyone in the supply chain, regardless of their location. The aim of effective logistics management is to improve the efficiency of the operations, ensure customer satisfaction and increase productivity.
Bryce Bowman
Bryce Bowman is the Founder of People First Planning. Bryce has held numerous leadership roles, including finance director of a multinational supply chain and division CFO of a $150 million business. With this experience, Bryce founded People First Planning with the goal of helping mid-sized businesses reduce waste through improved planning.
“A robust and accurate forecasting process is critical to maintaining logistics costs…”
Specifically, last-mile freight and warehouse utilization are directly tied to an organization’s ability to predict future sales.
Imagine the efficiencies you could achieve if you could predict customer orders with 100% accuracy. Your last-mile freight costs would drop precipitously, as you could now consolidate orders with near perfect efficiency. Similarly, warehouse usage would decline, as your need for safety stock would drop to near zero.
While it’s not realistic to predict customer orders with 100% accuracy, even modest increases in forecast accuracy can yield material reductions in inventory. Each increase of 10% forecast accuracy yields an average reduction of 5 days of safety stock. For instance, an increase from 50% to 70% accuracy would yield a reduction of 10 days of inventory.
70% is often cited as a reasonable standard for demand forecasting accuracy. At this level, most businesses are able to shrink safety stock to about 30 days of inventory, and they can free up valuable warehouse space and virtually eliminate excess and obsolete stock. For this reason, a robust forecasting process should be considered an essential ingredient to any logistics strategy. Solid forecasting allows the business to make the most efficient use of physical resources and prevents the business from having to make ever-increasing investments in warehouse space.
Arnold Chapman is the Managing Editor of ELD Focus.
“The number one priority for any logistics strategy has to be your KPIs (key performance indicators)…”
How can you ensure that your efforts are coming to fruition if you have no defined measurement framework? It’s easy to overlook such a simple aspect that can be easy to ignore day-to-day, but the truth of the matter is that it’s the core underpinning of any strategy.
Rorie is a high impact Interim Tech Leader, part of the GRO.TEAM, Founding Team and the author of The CTO ¦ CIO Bible and How To Be A Hero CIO | CTO course.
“The following are the important ingredients in developing an effective logistics strategy…”
Watch out for your competitors and do something the others are not doing. Avoid things that everyone is doing. Position yourself as an exclusive handicraft courier service.
Find areas and regions that are not served or underserved. You don’t have competition or volume there, but entering is easy. The solution here is to find areas that are not compelling enough for the biggies. Regions like Sikkim do not have any international couriers operating, but their handicrafts have a global market. You may even want to promote these local products, building your own volume.
How will you serve these regions? Leverage the local service providers like corner grocers and create a franchise network of collection centers. Do some local marketing by distributing pamphlets, putting up flex banners, etc. for low-cost visibility. Once you have set it up, have them collected, shipped and delivered. The operational strategy must also be cost-effective.
Justin is the President and Chief Commercial Officer of Contender Brands, LLC based in Atlanta, Georgia. Contender Brands is a consumer products manufacturer whose mission is to develop and cultivate ideas that bring simplicity, joy and laughter to life. Justin is a thought leader and subject matter expert in the data, analytics and supply chain space with a focus on the consumer products and retail industries.
“The top priority should and must be a solid data strategy (and related analytics strategy)…”
Here are details as to why data is so critical to a logistics strategy:
Data and Logistics: The process elements of logistics yield large volumes of data, rely on many different data inputs and with new methods for collecting and utilizing data, the overall logistics (and related supply chain processes) can be more efficient, optimized and actually yield a better end-consumer experience due to visibility.
Data in Logistics: Logistics processes leverage back-office ERP or operational data, weather data, route-planning data, traffic data, vehicle sensor data, order data and much more. These many different types of data are all in different formats and are challenging to make sense of without a strong data strategy, a plan for accessing and leveraging the data and even forward-leaning into artificial intelligence and machine learning (as well as automation).
Data and Route Optimization: One strong use case for data in logistics is around route planning. Never has more data been available (free) than today, from traffic, road, construction and weather data to truck fleet maintenance, performance, speed and availability data. Integrating these data sets in a solution that enables effective route planning — globally — is key to a strong logistics strategy.
Data and Transparency: With mobile devices, sensors and low-cost scanning equipment and devices, access to shipment location, forecast delivery and shipper performance data readily available, shipment transparency and visibility is better than ever. It still has a long way to go as many solution providers work to make sense of the many different types and variations of data.
Master Data Strategy: One space that is still not as clear is a master data strategy that allows for elements coming together from various sources and systems.
Bottom line: A logistics data and analytics strategy is a critical enabler to logistics strategy.
Ian Kelly is the VP of Operations for NuLeaf Naturals. He’s helped launch two major cannabis brands in both Colorado and Massachusetts and has consulted for many firms across the country. NuLeaf was ranked #11 overall, #4 for Health companies and #1 for Hemp companies, as the fastest-growing in America in the Inc. 5000.
“The most important ingredient in developing an effective logistics strategy is fine-tuning warehouse processes…”
Most companies lose too much time, energy and effort in warehousing. Ironically, this is an aspect over which a company can have complete control. An ideal step is to work out the entire warehousing strategy first and then move onto other aspects of logistics.
Thomas is the CEO of Check4Lead. He is a serial company founder who moved to the US in 2016 and raised money from a venture capital fund for his first business, followed by raising money from an angel investor for his next business. He is also the recipient of a National Interest Waiver green card, getting help from a congressman and senator in the process.
“The single most important ingredient in developing effective logistics systems is to…”
Set up correct incentive systems at different logistics steps that reward people for not just doing their part but also working with the person before and after them. ‘You can’t improve what you don’t measure’ also applies within logistics systems, so if your goal is to cut down on a metric, offer incentives for that metric diminishing.
Implementing smart automation solutions, such as collaborative mobile robots, is one of the most important factors in an effective logistics strategy. Learn more about how collaborative robots can transform your fulfillment operations with the flexibility to meet increased demand and reduce costs by downloading our white paper, The Business Case for Collaborative Mobile Robotics.
