For businesses in the SME sector, a “multinational” can be a customer, a competitor or an example to follow in some areas. The majority of multinational companies have continually integrated a control system into their corporate culture that analyzes costs in a comprehensive and operational way. In the practice of domestic companies, this method is less a part of the activity, mainly in terms of the number of surveyed areas and the depth of the analyzes. A consciously built company, aiming for long-term competitiveness must regularly review changes in market demand on one side, and the effectiveness of corporate performance on the other.
In this circle, logistics – especially warehouse logistics and inventory management – are often left out of due diligence, for a number of reasons.
For a smaller company, there isn’t always a logistics professional in the team who can perform this task to a high standard. On the other hand, the logistic environment of a business is treated as an indispensable asset and is therefore not examined. Forwarding is probably the only area where costs can be tracked relatively easily, so from time to time you may need to involve a new shipping company or replace an existing one. The extent to which logistics is a “stepchild” in public thinking is well illustrated by a survey showing that 50% of the enterprises in the Hungarian SME sector were not able to report at all on some of the costs incurred in this area. This makes it clear that, under these circumstances, neither area can be accurately planned for nor effectively controlled. And as to what is the “stake” of this? Well, for example, in the case of a company engaged in commerce, the cost of logistics can be up to 20% of the total cost of the business. However, this is already is an order of magnitude that may be worth considering as a strategic issue and subject to regular review.
In the field of logistics consulting, warehousing logistics and it’s costs, evaluating efficiency indicators is a complex task, evaluation is complex: because information from several areas of the company have to be evaluated side by side to get a realistic picture. It is worth having the help of an external logistics consultant for such a task. There are 3 main reasons for this.
- The external logistics consultant shall have the appropriate expertise.
- As an external observer, your thinking is not bound by the established routines and habits.
- Has some experience in successfully solving problems of similar businesses.
When and how should you outsource logistics?
Well, ideally, when you start a business, or even when you make an investment decision, a warehouse logistics and shipping system is “concreted” both figuratively and physically. In this case, we can consider even more alternatives “painlessly” and can develop and execute a strategic plan that is tailored to the business plans and resources.
We can plan to deal with warehouse logistics and freight forwarding with our own infrastructure, or outsource, or implement a mixed (own + outside) routine based on the nature of our business. Another possibility is to set up a monitoring system with the help of an external consultant, which involves the systematic collection and evaluation of certain data. This can be reviewed and improved once a year with the consultant. Alternatively, in case of signaling from the monitoring system, develop immediate measures with the involvement of the consultant.
However, practice shows that logistics consultancy is used by companies that have already identified the problem (beyond the “pain threshold”) and are committed to addressing it. With iLogistic logistics consulting services, we help our business executives identify the strengths and weaknesses of their existing system, understand their partners’ realistic service needs and find the optimal warehouse logistics and shipping solution.
Our specialists sat down with the firm’s competent staff and jointly assessed what could cause the problem. Two critical points were identified in the process.
Analysis of the data shows that hard-to-order orders and high workloads do not allow our partner to create their own infrastructure and staff for the task, as this cannot be included in the sales price. An average of 6 business days is available to complete 3 monthly deliveries, but the rest of the month, there is no task to be done by the colleague.
Our company was able to bid at a reasonable cost, so cooperation began. Upon our partner’s request, iLogistic will take over the incoming goods. Then, within 24-48 hours, you scan the barcodes by opening and closing the box for each product and making the barcode lists for the delivery notes in accordance with the shipping instructions. Following picking and packaging as instructed by our partner, the products will be handed over to the international carrier provided by the partner.
Our Results
Following the changes, our partner was able to meet the very tight delivery requirements of its foreign partner. In this way, he has managed to retain an important business partner and, of course, the revenue and profit it brings. Even if we do not take into account the necessary investment costs, just the costs that are closely related to the activity, our client still saves 11 million forints a year on leaving iLogistic to solve the problem.
