Improving Your Logistics Efficiency in 7 Easy Steps
by Jason Stark
In ecommerce, the most important thing to understand is logistics efficiency. In short, it's an internal metric you can use to determine if you are using all of your resources to their full potential and saving in every way you can. Keeping that in mind, as you read through this article be on the lookout to find areas to improve in your current logistics processes.
1. Use the right software for the job
Often, I have found businesses using some software simply because the owner or manager was familiar with it. While this has benefits, the drawbacks can often drag you down without notice. Even within the same industry, businesses can have drastically different processes for accomplishing the same task. Without thoroughly comparing additional software to your processes, you could be losing money through inefficient processes.
As an example, in warehouses that do picking and packing, the software could be using an inefficient pick flow. This means warehouse workers could be losing time, and over the long run, costing you lots of money.
Processes are just the tip of the iceberg. If you aren’t utilizing the proper software to manage your shipping, you could be losing tens of thousands of dollars every month, depending on your volume.
2. Not hiring the right people
As a business owner, I know the urge to save a dollar here and there can be very enticing. And in some of those cases, justified. However, when it comes to logistics, you don't know what you don't know. The problem is the things you don't know in logistics can cost you – big time.
Not everyone in your company needs to be an expert in logistics, but having at least one person who has been there and done that can save you bundles of money on the back end. A seasoned professional who can accomplish something like negotiating an extra 2% discount on your shipping can have a drastic impact on your business over a year.
3. Get creative and negotiate
Having consulted for several logistics companies, the first thing I notice is that people are often all too willing to accept the first price a supplier offers. This is one of my favorite areas to exercise my creativity. I will do everything from asking for discounts to free equipment in exchange for minimum volumes on expendables.
For instance, you might be able to find a supplier willing to loan you an automatic tape dispenser if you order a certain amount of tape. I have worked in warehouses where they were given free box-making machines (valued over $1M) simply by ordering enough corrugated cardboard.
It never hurts to ask for discounts or creative solutions that can be a win-win when it comes to suppliers.
4. Constantly review everything, and if it’s not working, find a new solution
Another area I see companies fail is reviews. It’s easy to get bogged down in the day-to-day operations and let things slide. I get it.
The number of times I’ve heard, “If it ain’t broke, don’t fix it,” is crazy. This attitude could be costing your company untold amounts of money every year. Many vendors base pricing on volume. Has your usage of paper doubled? If so, it’s a good time to call your vendor to renegotiate. Even if you’re in the middle of a contract, I’ve found that it can sometimes be cheaper to break your contract and get a new supplier at heavier discounts. I had never seen a vendor who wasn’t willing to work with me when approached correctly.
This goes for internal processes as well. Don’t let the excuse of having always done something one way prevent you from finding a better solution. For example, is your dock always backed up during receiving days? Reevaluate and find a better practice. Saving a few man-hours every week can add up at the end of the year.
I find it an excellent practice to reevaluate most processes and expenditures quarterly to even monthly, depending on how quickly a business is growing. Ultimately, don’t be afraid to switch things up to improve things for your company.
5. Communicate, communicate, communicate
Without a doubt, the number one reason I see businesses fail is the lack of cross-departmental communication and sandboxing. If you're not familiar with sandboxing, it's the act of one department not letting anyone from other departments know what they are doing. Effective communication is critical to the success of any logistics environment. For example, if a warehouse knows a potential issue could impact operations or a client, they need to notify all parties involved immediately.
Often, issues that start in one department can have a far-reaching impact across multiple departments. Therefore, you have to foster and have a structured system of communication. It's a must in today's logistics environment. Things move too quickly to not keep everyone in the loop.
6. Constantly train and hold employees accountable
Training is often one of the most overlooked aspects of any logistics process improvement plan. Unfortunately, it’s surprisingly common for a business to hire someone, train them for a day (if that), and never train them again unless there is an incident. Often I find employees will begin to take shortcuts or find ways to work around processes. Sometimes these can be of great value to learn from and teach other employees. Other times, many of these workarounds can be detrimental in ways that they may not realize.
Be sure to provide follow-up training as frequently as reasonably possible. Some of the most well-run organizations I have worked with provide quarterly training check-ins. These don’t need to be super detailed – a quick run-through is usually all that is required.
Most critical of all is to have your employee verify (either verbally or in writing) that they understand the training and stay within the operating procedures.
7. Outsource everything you can (at least that which makes sense to)
Every company has those things that they cling to. Something that they know they probably shouldn’t, but still do anyway. This can be everything from taking propane cylinders to getting re-filled to managing your books. These things make us feel more connected to our business but, in reality, are pulling us away from the things that make us money. So, in most cases, when I run through the numbers, I can usually find an option as cost-effective or cheaper when comparing apples to apples.
This means that you and your employees can focus on the critical components of running your logistics operations. Imagine what you could accomplish with even just a few more hours back every week: inventory audits, reorganization, training, and more. Focus on the things that make your business money and run smoother. Get out of the weeds.