It Pays to Rethink Logistics

It Pays to Rethink Logistics

We all know shippers face significant challenges in today’s economy. Not only is it difficult to effectively control multiple processes, vendors, carriers and internal communications amid these unprecedented economic times, any misstep risks a shipper’s important principle — customer satisfaction — and most likely incurs cost.

Typically, if a product arrives late or damaged, the shipper’s reputation takes the hit. And with cost pressures existing at every turn, shouldn’t logistics decisions be driven purely by upfront cost and convenience? Isn’t it better to use existing in-house resources to manage shipping? Maybe not.

When shippers take time to rethink their approach to logistics and fully examine the players, they may discover a more efficient, cost-effective logistics solution that saves dollars upfront and creates long-term, tangible value.

Consider these three steps:

1 Above all, evaluate core competency.

Often when shippers defer to initial cost or long-standing routines to guide their decision, they may rely on their suppliers for logistics support. Seems easy enough, but shippers may unwittingly pay a big price if supply chain management is not the supplier’s area of core competency. If a provider lacks strong knowledge of transportation scheduling and understanding of how to appropriately match shipping terms with carrier capabilities, the shipper may find itself paying for unnecessary services or incurring greater costs because of service failures.

Matching carrier capabilities rather than promises to service needs is a critical step to delivering the right service at a competitive price. Carriers who are asked to perform transportation services that do not align with their core competency often struggle. This can lead to service failures, damaged customer relationships and increased costs to the shipper. The associated costs can easily exceed any savings that were part of the initial bid.

Shippers can benefit by choosing a logistics expert to assist them with their supply chain management, and benefit most by choosing a third-party logistics provider actively engaged in the shipper’s area of business, one that understands the specialized needs within the shipper’s own business.

2 Effectively managing company resources often includes outsourcing.

Outsourcing is gaining momentum in business strategy as companies strive to develop activity-based or variable-cost models designed to reduce risk and maximize internal resources. Choosing to manage logistics in-house today requires significant investment in qualified people and the different tools they need to satisfy customer needs and operate effectively.

The flexibility, resources and stability available through strategic third-party outsourcing can help companies create a competitive advantage in their supply chain. By outsourcing with the right partner, shippers can tap the expertise of supply chain managers, bring in new technology and gain access to additional resources while they stay focused on their core business.

But you may say an outsider doesn’t know your specific requirements as well. To that end, shippers must seek a 3PL that will invest in the relationship and start early with rigorous process mapping to gain a keen understanding of a shipper’s supply chain requirements.

This in turn allows the 3PL to develop a customized transportation solution to integrate into existing operations. Shippers should collaboratively develop a detailed execution plan with the 3PL provider to bring even greater value and accountability to the partnership.

3 Collaboration creates greater visibility.

Do you really know where the costs are in your supply chain? This powerful information allows shippers to easily become more efficient. Unfortunately, supply chain visibility isn’t always available to the shipper who works directly with multiple carriers or relies on suppliers, due partially to available technology platforms and/or the scale of the relationship.

Technology obviously is a powerful tool for achieving a more convenient and efficient supply chain. Look for Web-based tracking and custom reporting to create greater visibility and accountability throughout the entire process.

In addition, by working with a logistics partner with detailed budgeting and analysis capabilities, shippers can expect to learn exactly what the cost drivers are. This increased level of information can provide dramatic results — often saving customers hundreds of thousands of dollars.

By implementing a collaborative review process with a 3PL, inefficencies can be identified and jointly addressed. This provides the opportunity for significant savings in the future.

Collaboration with a 3PL to better manage the supply chain can help a company not only effectively manage costs, but improve its brand integrity and competitive position in the marketplace. It’s an important way that rethinking logistics can pay.

Jeff Faust is vice president and general manager of Koch Logistics. He can be contacted at jfaust@kochlogistics.com.