Logistics is, simply put, the planning and execution of a complex operation. In a business, this generally involves the supply chain, which is how a company moves supplies in different stages of development or production from one place to another.
As you can expect, logistics are incredibly important to the smooth running of any business. This is the way that products are manufactured and finally delivered to the customer. Without a solid logistics system, then the manufacturing process can be delayed or even ruined.
Supply and Demand
One of the tenets of good business is to be aware of the demand for the product that you’re making so that you can supply the right amount to your customers. With an accurate assessment of supply and demand, you can make some major, and costly, errors.
Once you’ve started manufacturing a product and you have it in storage, you’re stuck with it until you can sell it. However, if you’ve grossly overestimated the demand for your product, then you will end up with far more than you can sell. Not only will you have spent too much time and money on manufacturing, but you also have to store all of this product, which also costs money.
Oversupplying a product can result in wasted materials and a net loss, as your company may be forced to either sell the products at a heavy discount or even trash them. This isn’t just bad financially, but it can look bad for your company as well.
On the other hand, undersupplying a product can also impact profits. True, you don’t lose money, but you also miss out on an opportunity to make more. Not only that, you may scramble to pick up the slack and make more products. While this can work, it can also backfire, interfering with the manufacturing of other products and potentially resulting in lower quality work or products that aren’t delivered in time. Again, this can impact the reputation of your business.
However, if you correctly predict the demand for your products, then you can supply a reasonable amount. There’s nothing wrong with having a slight excess or running out of product eventually, but the closer you hit the mark, the better it is for you and your customers.
Storing Goods and Materials
In most situations, you will have to store materials and products until you can either use them or sell them to customers. Ideally, you won’t have a massive stockpile of these materials, as this is a sign of inefficient logistics and you will generally have to pay for the storage.
When storing goods, it’s important to keep a regular inventory and check the flow of materials moving in and out of the warehouse. The warehouse should also be secure, clean, and well organized so that you know exactly where everything is and what you have stored. It should also be in an environment that keeps the materials safe and undamaged.
Most materials in a warehouse are stored on pallets to keep them off the ground. This prevents pests from getting at them or mold from forming, but proper storage methods does depend on the type of goods that you are storing. Some things need to be stored at certain temperatures or humidities, especially if they can spoil.
Keep on checking the materials in storage. It may be beneficial to outsource some of your storage needs to a dedicated logistics company, or to use other services to facilitate your company’s needs. For example, pallet collection services reduce waste and increase efficiency.
A vital part of the supply chain is transporting goods from one place to another. Companies should strive to have a sustainable supply chain wherever possible, for a variety of reasons. First, there’s the fact that customers and employees appreciate companies that make the extra effort to help the environment. You can use your efforts to market your business and develop a good reputation.
Another important thing to consider is the cost of transportation. Fuel prices are at an all-time high and, while this might not last, they are unlikely to fall to previous prices. Because of this, cutting down on fuel consumption saves money and the environment.
Where possible, keep your manufacturing and warehousing structures close together, so that you don’t have to transport goods too far. Look for alternative ways to transport them and make sure that you look after your drivers and vehicles.
Image Credits: Marcin Jozwiak
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