How Logistics Can Affect Your Bottom Line By Patrick S. Harbour, LEED AP, Harbor Contractors Inc.
ogistics. It’s a word that’s been used a lot lately. But beyond being a catchy word, what do we really know about it? Logistics is defined as the management of materials flow through an organization, from raw materials through to finished goods and it can have a huge impact on your company’s finances. Higher transportation costs lead to higher overall prices (without additional profit) and have been estimated to be 25% of a company’s bottom line. As with many things, it often comes down to location, location, location! Proximity to transportation options (road, rail, air, or water) may produce a higher upfront cost for headquarters, production facilities, and warehouses, but can realize significant savings in shipping costs over the lifespan of a company. www.buildingindiana.com
A private rail spur, for example, puts you in control of your goods and materials. There are costs involved with upkeep and maintenance, but compared to the potential lost revenue for personnel time and sales when relying on an outside source for movement of goods, they’re miniscule. Leveraging volume can also help keep overall costs down. We often think nothing of spending a small amount on a regular basis, but balk at a large capital output for the same thing. If your company alone doesn’t have output that would be considered “bulk,” coordination with a supplier or distributor to co-locate may produce similar savings results related to logistics costs. Another way that improved logistics practices can help a company realize increased profitability is through reliability. As the distance of a product to travel decreases and the less touches it has in transition, the lower the chance of an error
(delay, damage or misdirection) prior to final destination. Decreasing these wasted costs increases the bottom line regardless of industry. This reliability in transport also improves the probability of on-time delivery and heightens customer satisfaction and the likelihood of repeat business. The environmental impact of logistics considerations is often understated as well. Reducing the amount of energy used for transportation through improved logistics practices decreases the volume of greenhouse gases emitted. These changes can also reduce the carbon footprint of products over their entire life cycle and, perhaps, even qualify for grants or other savings options through environmental initiatives and programs. Is your company investing for its future or are you looking at your bottom line now? A little planning for logistics now can pay big dividends in the long run and result in increased overall profitability. 9
Published on Jul 23, 2013