How Your Logistics Strategy Can Be Your Core Business Plan

 

What is ‘innovation’? You may have heard the term fly around in business meetings, but what does it really mean to the chief strategist of the company? Innovation means, approaching a problem or an inefficiency from a different angle or viewpoint to derive more value from it. To put it a straight war, innovation is to create or harness more of what you already have.

 

Take your logistics management processes for instance. How many companies consider this as a cost?

 

Let’s analyze the cost approach to logistics management:

 

Many companies slate logistics management as a factor of the bottom line in their accounts. There is merit to this approach as it means that the more you ‘save’ the more you ‘earn’. CEOs incorporate different fleet management software and a proper GPS vehicle tracking system as route optimization solutions.

 

This approach satisfies the equation:

 

Profit = Income – Cost.

 

According to the equation, you can increase profit in two ways:

 

  • Increase income
  • Decrease Cost

 

You can either increase your income through exciting promotional activities or intriguing product features, or you can decrease cost by optimizing your logistics and other ‘overheads’.

 

“There is a limit to how much you can cut your costs without affecting service quality. Eventually, you must look to differentiate yourself better”, Dhruvil Sanghvi, CEO, LogiNext.

 

The market has reached a saturation point where cutting costs is the first option for any company, leading to a point that their service standards are stretched very thin. This creates a platform which a disruptor can capitalize on, with top-notch service credentials. Karma Bhutia, CEO, iShippo, “I’d like to believe that a disruptor to any industry is just 6 months behind.” There is someone who can do things in a better way. But here is the paradox, the costs are already cut to the minimum level. What is the disruptor doing that is turning profits?

 

Let’s Consider Logistics as an Opportunity

 

Take another look at the equation that we used earlier: Profit = Income – Cost

 

Let’s rearrange the variables: Income = Profit + Cost

 

What this simple rearrangement does, is that it redefines cost as a problem and makes it an eventuality. The entire concept stands altered now. This is called the income approach.

 

Income is estimated in two steps:

 

  1. Set a cost line

  2. Add a profit percentage

 

You can increase income by adding a ‘premium’ profit percentage on your cost. Dhruvil elaborates on his vision for the logistics management industry, “The income approach frees up the company policies towards innovation. You can transfer a part of the cost to the consumer, as long as that cost adds value to the end product in terms of features or ease of use.”

 

In a saturated ‘perfect competition’ market scenario, a disruptor can invest in a proper fleet management software and GPS vehicle tracking system. Through these logistics management software, the disruptor can create a unique value proposition for the end user. When two big players are cutting costs by compromising on services, a third player offers better service at a marginally higher price. The added comfort and ease offered by the new service would eventually help the third player to capture the other two player’s market share.

 

There is another element in the income approach. As you keep investing in costs (research), the learning curve would, in the future, reduce your overall logistics management costs. For example, if you utilize the vehicle tracking system of your fleet management software, you can enable geo-coding of new locations as you reach them. This would help in route optimization for the future when other delivery personnel approaches the geo-coded co-ordinates. This would be a self-learning system that builds on data points to enhance its data analytics capacity. Eventually, you would be able to optimize your routes while reducing travel time and resource costs. This would fulfill the intent behind both approaches.

 

Let’s See How You Can Use The Income Approach

 

Logistics Management at The Center

Queensland Logistics Management

 

With logistics management, you can boost your service quality to another level. The service quality, today, is a game of features and applications. You must enhance your logistics management system with the following features if you want to boost customer retention through customer satisfaction.

 

  • Fleet Management Software: If you are in the e-commerce industry, you would know that there are a more than one lakh deliverables during random sales events. You must optimize your fleet management software to maximize the resource capacity of your vehicles. The more the vehicles can carry, the more deliveries they can make in a day (in a single milk run).
  • Route Optimization Software: The above point is just one half of a solution; the other half is covered through a route optimization software. The vehicle can be assigned deliveries along an optimized route through which the on-time deliveries can be maximized.
  • Supply Chain Visibility: While completing the above processes, it is important for the manager, and the consumer, to know where the deliveries are in real-time. Real-time vehicle tracking can work to assure the consumer of an on-time delivery. Even a delay would be better managed through proper real-time vehicle tracking at both the manager’s and consumer’s end.

 

Even if you are not a part of the e-commerce industry, the above benefits would continue to apply to you. A proper fleet management software would streamline your production processes. The route optimization software would help you meet service level agreements through linehaul express tracking. Supply chain visibility would help you enhance the productivity of your utilized resources.

 

The takeaway from this interaction is simple. Logistics management can be a cost or a strategic investment. One of these choices would help you compete better in the future. Pick wisely.

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