Finding Opportunities Within Your Value Chain
We all need our checks and balances, and in no place is this truer than when it comes to running your business.
This is the entire reason why the value chain exists. First described by Michael Porter in his book, Competitive Advantage, the value chain was conceptualized as a tool to evaluate a business’s inputs and outputs. If your inputs are greater than your outputs, your business is creating value.
As you can imagine, determining the cost of your primary and supporting activities helps to develop a clearer picture of how your business operates. It is here where primary stakeholders can hone in on what differentiates their company from the competition and identify opportunities that can strengthen their competitive advantage.
Logistics is a massive component of the value chain, composing for both inbound and outbound initiatives. However, simply too many businesses let these processes evolve over time without proactive decision making. They are lost in what would optimize their logistics.
Today, we wanted to talk about how you can avoid these mistakes with active logistics management and how you can find opportunities within your value chain.
When it comes to managing your inbound logistics, we have to tell you, it isn’t going to be a walk in the park. It is a careful balancing act between your shippers and suppliers – each with their own plans to achieve profit.
In the growing world of complex global trade, your business and product see more hands than ever before. This is why inbound logistics should be managed and streamlined for efficiency.
Done right, inbound freight programs provide greater confidence in whereabouts of shipments, reduces over and under-stocking, and develop greater accountability for each one of your logistical partners.
Here are just a few things, when implemented correctly, can turn your inbound logistics from a proverbial nightmare into a differentiating aspect of your business.
Vendor Inbound Compliance Standards (VICS)
When choosing suppliers, the end goal is a mutually beneficial agreement that can bring both of your venture’s value. This is the reason we make trade agreements in the first place. But what if your supplier’s behaviour is affecting the rest of your operations?
Vendor Inbound Compliance Standards (VICS) are one way to combat this issue. An agreement to share in between your inbound partners, VICS requires certain performance levels to be met for suppliers to qualify for a business contract.
VICS reinforce positive behaviours pertinent to the success of your company, while also condemning non-compliance and applying penalties towards suppliers who fail to meet agreed-upon standards. This ensures that suppliers take your company seriously and protects your business from inconsistency.
Whenever you are utilizing LTL (Less-Than-Truckload) shipments, you’re losing potential value within your inbound logistics. In fact, 10-14 different LTL shipments take your company 5 times as long as unloading one full truck.
All of this extra time is money burning in your pockets. We understand that it isn’t always possible to consolidate shipments, especially if you’re a smaller corporation, however, this doesn’t mean you’re out of luck.
Look for metrics such as departure and arrival times, weights of shipments, current fuel expenses, shipping and handling requirements, as well as points of origin. Combining items that have similar importance, deadlines, etc. can bring about incredible savings in the right situation. Remember, these small savings mean a lot in the long run of your business.
Companies that are still struggling to piece together a beneficial transportation strategy can find solutions within third-party logistics (3PL) companies.
Specializing in supply chain management, 3PL’s offer not only their expertise in building successful transportation schedules but also their already established network of shippers and distributors. If you need tips on how to evaluate a 3PL partner’s credibility, here’s what you should be looking out for.
Transportation Management Systems (TMS)
One of the greatest advancements to logistics, both inbound and outbound, is the introduction of technology. Taking away some of the most monotonous tasks, transportation management systems (TMS) save time and generates savings.
Albeit, at a cost. However, if your company is dealing with shippers and distributors on a daily basis, TMS might be exactly the cost and time saver you need.
This specialized software has a lot of other benefits included, such as dynamic rates according to market conditions, real-time shipment location, and can allow you to set vendor allowances, all in one place.
Let’s be honest, without your customers, where would you be?
Outbound logistics look at all the activities needed to distribute your product to prospective customers, while also doing your best to provide a quality experience.
Activities such as warehousing, order processing, scheduling drivers, and finally transporting your goods via ground, air, or sea are all areas to be considered for outbound logistics.
As with inbound operations, we can’t touch upon every aspect to be optimized, but here are a quick few activities for your business to consider.
Inventory in your warehouse isn’t there for free. Just holding onto goods incurs both quantitative costs and opportunity costs for your business.
Cross-docking limits the number of time goods spend within your warehouse through expedient management of outgoing orders. Instead of taking two separate steps of unloading and shipping, arriving shipments abled to be processed towards the end consumer are packed and shipped right away.
This activity helps to lower inventory waste, increases customer satisfaction due to prompt shipments, and reduces the possibility of having damaged goods sent to the end-consumer/vendor.
Reducing Inventory Costs
Following along with the topic of inventory, there are plenty of other management principles that can reduce costs incurred.
One of the ways to create savings is with vendor managed inventory (VMI). Removing the requirement of safety stock while also reducing purchasing costs, a VMI strategy offers quite a few benefits.
As a manufacturer, VMI means you’ll have access or information concerning your customer’s inventory levels. This can prevent stock-outs as vendor inventory is usually a metric outside of your reports. The more knowledge you have of your supply chain, the more accurately you should be able to predict shipping requirements and reorders.
A simpler task, if VMI is not possible, could be instituting a lean inventory management technique within your own operations. Aiming to eliminate waste through continuous improvement, lean management requests owners to think critically about their outbound effectiveness.
Third-Party Logistics Company
One of the best decisions a manager or owner can make is the ones where they recognize their lack of resources or expertise to get a job done correctly.
Not every business is going to be suited to handling the seemingly infinite objectives within a value chain. Hiring third-party logistics companies put you at ease, providing breathing room for you to focus on your core initiatives while being confident that your shipments will be handled professionally.
Options Transportation is here for this specific purpose. We have a passion for helping your business succeed through cost-effective and efficient supply chain management.
If you or a business you know needs solutions for freight, cross-docking, and inventory management, we have the right options for you! Contact us today to discuss your operations and how we can help you achieve your business goals for 2020.