Building A Logistics Network

A strong logistics network is crucial to ensuring your supply chain meets the growing demands of your customers. Whether you’re just starting out, or already have an established logistics network, it is important to be aware of the various options available to you and to periodically re-evaluate how your network is performing. If left unchecked, your logistics network could be costing a lot more money than you realize, or worse, is failing to meet the demands it is designed to fulfill. Take the following factors into account next time you assess your network.

Know your Customer

The key to optimizing your logistics network is to understand your customers. Compile a list of where your customers are located, the expectations they have in regards to delivery, and what products and services they demand most. Make note of both repeat and one-time customers as well; each type can provide unique insights into areas where your logistics network may be improved.

Evaluate your Business

In conjunction with knowing your customer, you should determine what objectives best align with your business. Is your primary focus on reducing costs? Or does your company strive to maximize quality and customer service? Perhaps your company would like to expand into a new geographic area, or is planning for the release of a new product line. Take all of these factors into consideration, and strive to find a balance that best suits both your customers’ needs and those of your business.

Mode of Transport

Choosing the right mode of transport can be the difference between meeting urgent service demands, saving thousands on shipping costs, or potentially both. Shipping via air typically ensures your freight will move quickly, but often at a higher cost. Shipping via ocean, however, may reduce costs significantly at the expense of longer transit times. For ground or domestic shipments, consider both truck and rail options when available, and also water routes. In certain cases, chartering an aircraft or ocean vessel may be the best solution to your shipping needs, especially if you have a significant amount of large or bulky cargo to ship all at once.

Distribution Centers (DCs)

Distribution centers serve as local storage and handling facilities within a larger logistics network. They are typically positioned closer to customers to provide faster delivery times at reduced shipping costs. Some companies opt to have just one, centralized distribution center for all their customers, while others establish a vast network of DCs spanning multiple regions. Localized DCs allow for the fastest shipping to customers in a specific area, as opposed to shipping direct from manufacturer to each customer individually. However, the more DCs you have in your network, the more complex your shipping plan becomes, which may impact visibility.

Forward Stocking Locations (FSL)

When expensive, time-sensitive products fail, it could cost a company millions per day until repairs are made or suitable replacements are provided. Even worse, as a supplier, your technicians may not have this expensive equipment on-hand; therefore it must be ordered, and your customer has to wait for it to be shipped. This is when a forward stocking location could be an invaluable asset to your logistics network.

Like a hub or distribution center, FSLs serve customers (or other DCs) in a specific region or area, but with the added benefit of storing stock long-term and stock which may have already passed through customs from its origin. Instead of waiting for replacements to be shipped from the manufacturer, what if your technician could simply locate, pick up and deliver parts to the customer same-day for exceptional customer service? This is where FSLs provide the greatest benefit, and may either be owned outright or rented as storage space. Then when stock is used, it can be replenished at your convenience, which may even allow for consolidation.

Consolidation

If you ship products to the same destination on a regular basis, such as a DC, it may be more cost-effective to consolidate shipments that share the same origin. Although the rate per unit of weight or volume may be similar, savings can be realized from only paying for one shipment as opposed to multiple, smaller orders. Some carriers also prefer that you ship in bulk, as this allows for them to fill trucks and containers more quickly. For this reason, carriers and freight forwarders may offer you a discounted rate if you consolidate your shipments.

Building Blocks

As you evaluate your logistics network, take time to carefully review the factors listed here and make note of how they currently serve to your shipping needs. If you’re building your network for the first time, be sure to refer to your customer and business goals as a guide for how you should arrange your network. Then when you re-evaluate, consider the alternatives of each factor for feasibility and cost. Additional opportunities for savings come from careful planning if you re-evaluate and continue to monitor your network frequently.

 

About Allyn International

Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance.  Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North America, Europe and Asia and Allyn regional headquarters are strategically located in Fort Myers FL USA, Shanghai P.R. CHINA and Prague, CZECH REPUBLIC. For more information, log on to www.allynintl.com.

Contributors: Mark Trowsdale