The best content on costs and profitability

Learn how poor business logistics can lead to losses

Learn how poor business logistics can lead to losses

Business logistics is not just related to the transport of supplies, inputs and products. It is also linked to the process chain which starts before a purchase or sale and ends with receiving or a delivery.

Within this context, many setbacks can occur. That’s why it’s important to prepare good strategies to avoid possible losses. Are you interested in this subject? Then make sure to read this article. We’ve gathered together a few tips that can help you!

Take a look at the problems that can occur with poor business logistics

Late deliveries

Logistics management also includes the responsibility of maintaining your relationships with your suppliers. This activity is fundamental to identifying the best partners and defining indicators of success.

When this management is not performed properly, it’s possible that less qualified supplies may be part of your logistics chain and may not honor your delivery dates.

It’s also the job of those responsible for business logistics to analyze and decide the best form of transport, CIF or FOB, for your business chain and needs.

For example, in FOB your company is responsible for transport, not the supplier. Without ideal preparation, deliveries of supplies and inputs can end up being continually late.

Accepting imperfect shipments and delivering products with defects

One of the important indicators in terms of logistics and stock management is the perfect order rate, which is based on the percentage of purchase orders received with no problems compared to the total number of purchase orders. This should be maintained at 100% or very close to it.

If this is not well monitored and evaluated, and is part of poor logistic management activities and processes, imperfect purchase orders can continue to occur. As a result, the organization’s production runs the risk of producing products of lower than desired quality due to receiving shipments below the company’s quality standards.

Losing customers

Logistics can also cover the area of your deliveries — in this case being the supplier — and your deliveries when they are poorly carried out can lead to your company losing customers.

Imagine that a large retail chain that resells your company’s products begins to suffer disruptions in its stock due to your logistics problems that cause delays and missing supplies for its retail buyers.

With bad results, it’s very possible that this reseller will soon end your commercial partnership to preserve its results and the satisfaction of its end customers. In fact, depending on the supply contract that you’ve signed with them, your company may be liable to pay a fine for delays and cancelled orders.

Find out how to avoid problems with business logistics

Define and monitor performance indicators

Up to this point, you’ve read about some problems caused by a lack of monitoring indicators. Therefore, you need to define them, prioritize those that are really important, and monitor them periodically.

This not only helps you visualize the success of your actions, it also helps you identify and correct errors and take steps to improve what is already working.

Map processes

When you have an operating model, it diminishes the risk of errors due to erroneous practices.

For example, you can have a line of analysis and decision making for purchases, a workflow for handling arriving shipments with the design and stamp of the receiving department, as well as other patterns that can be followed.

Align logistics with stock management

Professionals from these two areas need to exchange information and perceptions, because they are interrelated in some ways and affect each other — this is especially true of logistics which can influence your stock.

As we’ve seen above, a lack of alignment can cause daily problems for your company in terms of receiving supplies and inputs.

Develop contingency plans

Contingency plans can save your organization from serious problems caused by logistics issues.

For example, when deliveries are running late, this plan could include the maintenance of a contingency stock — a stock maintained to cover these kinds of shortages. Having nearby affiliates or a conveniently located distribution center can provide your company with an external stock regulator, which is also of great help when you’re suffering from delays.

Has your company already had problems due to a lack of well-mapped and well-managed business logistics? Do you use the processes we’ve mentioned to avoid them? Have you enjoyed this article about business logistics? Then visit our blog to access more tips related to the business world!