Some l ogistics experts share tips on How to Develop a Winning Logistics Strategy
For any company that is in the business of providing a variety of products and services to costumers, it is of crucial importance to the health of that business to implement a logistics strategy that will help keep service levels at their highest at all times, no matter what changes might be happening in other areas of the business organization. This is an even bigger imperative for companies that are more complex in structure, or that may have a very fluid or fluctuating supply chain, or that have specific product lines, specific countries or specific customers to cater to.
But what exactly should logistics professionals focus on to improve their business’ effectiveness? Should you spend more time identifying structural improvements to increase speed of production? Should you focus primarily on minimizing logistics costs? Or should you first spend more of your focus on identifying the best high-level organizational objectives and determine whether your overall logistics strategy contributes to that objective? Which tactic is right for your business and in what circumstances?
To help you evaluate your choices and even come up with some new ideas, we’ve asked some logistics strategy experts the following question:
“What’s your top tip for a new business (or even an established organization) looking to create an effective logistics strategy?”
We’ve collected and compiled their expert advice into this comprehensive guide to effective logistics management strategy. We hope it will help you maximize your company’s logistic resources and ultimately take your logistics strategy to the next level.
Shawn Casemore is the Founder and President of Casemore and Co, Inc. Shawn has spent nearly two decades leading, managing and motivating teams across a vast array of industries and sectors. He has worked with dozens of dynamic and diverse organizations including Magna International, Arvin Meritor and Bruce Power LP. Shawn is recognized as a thought leader in the area of operational excellence and his views are frequently published in industry publications including the Globe and Mail, CFO Magazine, Enterprise Apps today, purchasing B2B and many others. Shawn has also been a visiting faculty member at the Humber College Institute of Technology and Advanced Learning for the past two years.
My top logistics strategy tip is…
Leverage your predicted volumes to reduce price.
I have worked with numerous organizations to develop a logistics network (FTL, LTL, courier) during business launch. Finding providers who will offer the service levels required at a competitive price is challenging when you don’t have historic volume to rely on. This is when predicted volumes become essential. What are your predicted logistics volumes in LTL or courier in your first year? Positioning this correctly can yield significant discounts in freight costs, the outcome of which help improve bottom line cash and competitive advantage.
I helped one very small ceramic tile distributor negotiate their courier rates. We ended up using the top ranked international courier with a significant discount. My client was pleased, but was never able to validate the discount rate until one day their supplier (a larger national manufacturer of tile) suggested they ship using their own account (with the same courier). I compared their rate to that of the negotiated rate of my client to find a 20% difference (in favor of my client).
In logistics network strategy, identifying partners is all about leverage, real or predicted.
As the publisher of Inbound Logistics Magazine – a multi-media publication serving the informational needs of business logistics and supply chain managers globally since 1981 – Keith Biondo is considered a supply chain visionary. Early in his career, Biondo recognized the importance of helping U.S. manufacturers better match demand to supply, and his passion for that idea fuels many of Inbound Logistics’ accomplishments. Under Biondo’s leadership, Inbound Logistics helped grow the third-party logistics segment and taught shippers the importance of evaluating their 3PL providers. He also championed the concept of applying logistics technology to all aspects of supply chain management, from the largest ERP systems to the smallest SaaS solutions. Biondo currently serves as a board advisor to the American Society of Transportation and Logistics. Biondo holds a BA degree in History and English from St. John’s University, New York.
When it comes to an effective logistics strategy…
My one tip is to start practicing demand-driven logistics if you have not already done so.
The importance of better matching demand for your products to your supply goes far beyond reducing your transport spend.
When a company begins practicing inbound logistics or demand-driven logistics, transportation costs are reduced but the savings of replacing inventory with information, and providing better customer service to your customers, is even more important.
Beyond that important result, aligning your business to practice demand-driven logistics moves logistics management out of the functional silo and provides strategic benefits to the entire enterprise.
Subscribe to Inbound Logistics Magazine for examples, case histories, and best practices to help and support you as you embark upon your demand-driven logistics journey.
Steve Murray holds the unique role of both a Principal Consultant and as Chief Researcher for Supply Chain Visions. As the head of research at Supply Chain Visions, Steve is constantly monitoring the pulse of the supply chain industry for leading edge trends and best practices that Supply Chain Visions can bring to their clients.
Steve maintains the SC Visions “Catalog of Processes and Best Practices” – which is the foundation for both the Council of Supply Chain Management’s Supply Chain Management Process Standards guides and the Warehousing Education and Research Council’s Best Practice Guides, and he manages the SC Visions / CSCMP Glossary of Supply Chain Management and Logistics terms. Steve is also a member of the team which performs the annual WERC / DC Velocity Study of DC Metrics, and is a frequent speaker on the subjects of process improvement and the use of metrics.
The most important tip I can share with business professionals looking to create an effective logistics strategy…
Comes from many years working as a consultant to companies in the warehousing and supply chain areas. It is a rather simple, and extremely effective approach that is way too frequently overlooked, misunderstood, or simply not well executed.
New and existing companies should take time to understand the essence of Sales and Operations Planning or S&OP. Many times I see companies who “think” they know S&OP, and some who practices a form of S&OP without actually naming it. But I don’t see a lot of companies practicing it effectively.
S&OP simply defined is a strategy where all of the primary functions (Sales, Marketing, Product Management, Manufacturing, Warehousing, Procurement, Finance, Transportation) of the business come together as a team (face to face or via a communications link) to review, discuss and plan business activities. Note here that it does not simply include Sales and Operations, but must include all parties who impact, or are impacted by, the regular activities of the business.
This session must be viewed as a “team” effort, with all understanding a common set of goals (customer satisfaction, profitability, improved sales, etc.), and agreeing to work together to achieve those goals. The meeting should be held as frequently as practical, and the team should have a set of tools, KPIs and reports, to assist in regular checkups and notifications. Meetings should be focused and short, they should be about cooperation and strictly avoid confrontation. Yes, we will discuss what went wrong, but with a focus on the “why” and “how” of improvement and eliminating the issue. It should be more about planning for what is coming in the short and long term, and how the team will address it.
There must be commitment by all parties to move past the functional silos that continue to haunt companies. It must, over time, become an ingrained component of the company’s culture.
Properly executed, a solid S&OP process can do more than any other single logistics strategy to improve the odds of success. Once the “team” is in sync, the individual functional areas can turn to focusing on how to most effectively address their part of the process, understanding fully what the goals are.
Without S&OP it has been proven that most functions will create their own goals, but they are likely to not be aligned with the rest of the business. For example; A DC achieving a high fill rate for customer orders may not be good for the business if doing so comes at a high cost to the rest of the business. S&OP can help ensure that all of the logistics related activities are tuned to getting the highest fill rate possible in the most economic and efficient manner.
Steve Novak is the President of PPR Management Services, LLC, where he works with organizations to define and achieve their goals. He has over 20 years of process improvement and business operations experience, and is the author of “The Small Manufacturer’s Toolkit”.
My top tip for creating an effective logistics strategy is…
First define what you are trying to accomplish, what goals you are trying to achieve. Your logistics / supply chain strategy supports the goals of the business, so your supply chain strategy must align with and help achieve the organization’s goals. The second step is to articulate how the supply chain strategy works to achieve the higher level goals.
For example, if speed to market is a goal, the supply chain strategy will look different than one where the goal is to be the low cost supplier.
Clay Gentry is VP of Logistics Operations, responsible for developing innovative TMS technology and improving processes for clients of Transportation Insight, a leading North American 3PL. He has more than a decade of experience in non-asset based logistics management. His engagement with clients has included transportation planning and process management, engineering, continuous improvement and Transportation Management System (TMS) process design and integration.
The most important tip I can share with business professionals for better understanding how logistics strategies work is…
Logistics strategy is the science of evaluating the most cost effective methodology of distributing goods to market while achieving service level objectives. When establishing an effective logistics strategy, you need to understand to what degree logistics impacts your operations and your customers’ operations. How crucial is timely delivery to your inbound and outbound deliveries, and what constraints exist, such as budget, resources and existing network of providers. If you choose to outsource your logistics operations, make sure you use an organization that will work with you hand-in-hand to co-manage your logistics, so that you keep all your front-line carrier relationships and control. Work with an organization that doesn’t see you as a “project” but as a “partner” who will share with you their best practices and understanding of emerging trends. This partnership-type relationship ensures success within your logistics operations.