Crimson and Co are pleased to announce Director Richard Powell’s comments in an article on Logistics strategy in The Register.
Logistics may not seem as sexy as, say, R&D or social-media marketing – but messing it up could easily ruin your business.
Richard says there are two types of supply chain to consider when putting together a logistics strategy: supply push and demand pull.
Each functions differently, driven by different priorities, and it is important to understand the disparities.
Supply push chains typically use slower, more economic modes of transport to get bulk loads in place according to a planned schedule.
The type of product might be baked beans or low-cost clothing – items with a relatively low margin that need to be delivered as cheaply as possible and for which demand is predictable.
Demand pull uses faster, more expensive services to fulfil less predictable demand, driven by signals from the sales channel.
‘If the retailer or customer has the power in the relationship, then that’s a demand pull. You might end up sending smaller shipments more frequently, so the costs for you are higher for being more agile and responsive,’ says Richard.
An example here might be smartphones or an emergency medical item. ‘In that case, immediate response is good because they are going to pay for it,’ Richard adds.
Typically, demand pull chains focus on higher-cost items, but there is a caveat. If companies are bad at manufacturing and unreliable, customers can lose trust.
‘It could be a company that is so bad at manufacturing that customers give up and just start pulling everything. Once that happens, all the costs go through the roof. Then the manufacturers start to lose money on the whole thing.’
Maintaining solid relationships with suppliers, keeping your own back-end sales and manufacturing straight and sticking to your commitments are just some of the must-dos when planning your logistics operation as a small business.
Above all, it is all about keeping costs down while maintaining a level of service that customers are happy with. To truly understand your profit on each transaction, it is important to factor in the true cost of shipping, wherever you happen to be sending to.
No wonder, then, that some companies prefer to hand the whole thing over to an expert.