What are the objectives for creating logistics advantage
For any given supply chain to be effective, it is imperative that third-party logistics businesses meet several internal logistics goals and objectives. These business goals include:
- Increasing Efficiency
- Rapid Response
- Fewer Unexpected Events
- Minimum Inventory
- Reduced Transportation and Logistics Cost
- Quality Improvement
Increasing efficiency for both inbound and outbound logistics and transportation should always be a top priority for every logistics organization. To do so, they will need to develop cost-effective transportation rates while, at the same time, reducing overhead, cost-per-order processing, and inventory. By working closely with a transportation provider, warehouse operations like processes, layout, and flow can be improved significantly.
To increase efficiency, consider having the vendor perform value-added services like packaging or quality inspections. This will help catch any errors at the source. Likewise, form a two-way carrier relation with them to share best practices, trends, and opportunities.
Similar to efficiency, customer satisfaction plays a crucial role in the overall success of a logistics company. To satisfy your customer service goals promptly, consider a rapid response approach. Thanks to today’s technology, you can now postpone many logistics operations to the last possible moment.
This means that you can eliminate excessive inventories that were usually stockpiled in anticipation of customer requirements. You will also be able to shift your operational emphasis from an anticipatory posture and move toward responding to customer requirements based on a delivery-to-delivery basis.
Fewer Unexpected Events
Unexpected events can happen with every aspect of logistic operations. An unexpected disruption during manufacturing, goods arriving damaged at their final destination, delays with the customer order receipt, or wrong delivery, can all result in wasted time and resources.
Traditionally, these unforeseen events were addressed by establishing safety stocks of inventory or by using a high-cost transport mode. More recently, these have been replaced with sophisticated software, capable of achieving a positive logistics systems control. Depending on how much a company manages to minimize these events, its logistical productivity will also stand to improve. It is, therefore, in everyone’s best interest to keep any unforeseen circumstances at a minimum.
While on the topic of minimums and unexpected events, inventory management is critical. In the end, aiming to keep these events at a minimum will also involve asset commitment and relative turn velocity. This turn velocity translates to the rate of inventory usage over a given period of time. Inventory availability and high turnover rates indicate that your stocks are used effectively.
The objective of reducing inventory deployment to the lowest possible levels also works to satisfy customers and lower the total logistics cost. The concept of Zero Inventory has been gaining some traction in recent years as managers seek to reduce inventory deployment. This type of approach will have some definite benefits. When inventories are reduced to their lowest-possible levels, various operational defects and inefficiencies also start to show themselves.
That said, having an inventory does provide some benefits of its own. When it comes to economies of scale, particularly in manufacturing or procurement, inventories can generate ROI. In any case, the objective is to reduce the inventory to the lowest possible level, while also achieving the desired operational objectives.
Reduced Transportation Cost
One of the major costs associated with logistics is transportation. Lowering the cost of transportation requires movement consolidation. It’s important to remember that transportation costs are directly influenced by the type of product being shipped, the size of the shipment, and the distance.
Many logistics systems that provide premium, high-quality service often depend on high-speed, small-shipment transportation. This typically comes at a cost. As a general rule, the larger the shipment, and the longer the distance, the lower the transportation cost per unit. Therefore, having software capable of grouping small shipments for consolidated movement is ideal.