Logistics

Logistics begins and ends with the customer

In defining the meaning of logistics, most firms and “experts” discuss the management of the flow of goods and related information from a given point of origin to an end point; we are not one of those firms. The truth is, logistics begins and ends with customer demand. Logistics is nothing more than a knowledge discipline ensuring that customer demand for goods is met. While the coordination of logistical activities can vary from simple to complex, the end customer should always be the focus. So let’s start there. And end there.

In order to understand the value of logistics, the customer must be the focal point. The goal for any business is to have the right product in front of the right customer at the right time and at the right price. If any of the aforementioned elements are missing, supply and demand imbalances are created and reasonable minds can agree that is negative for your customers and costly for your business. Assuming that your business is targeting the right customers with the right goods or products, it comes down to having those goods or products available at the right time; and in the right amount; and for the right cost.

Let’s assume the marketing department has created the perfect advertising campaign and that the marketing forecast is perfectly accurate. The purchasing department has procured the raw (if you are a manufacturer) or finished products necessary to meet the forecast of customers’ demand. The question then arises as to how to get the goods to the customer to meet that demand at the right time. This is where logistics lives.

Price and cost of logistics

Price and cost are highly dependent upon the customer. Customers determine the price they are willing to pay to have your products today, tomorrow, this week, next week, next month or beyond; or alternatively, the cost to your business of not having the product available at all. The goal of almost all logistical activities is to make the product available to your customer for the lowest cost possible. Your product cost plus the cost to get it to the customer is known as the “landed cost”, where the goal is to make the landed cost as low as possible, to the benefit of the customer and to your business.

How do we reduce the landed cost? Reducing the product cost is up to you. Reducing the cost to deliver it is up to fulfillment companies like Southern Fulfillment Services. For starters, the larger the volume that goods move together at a time, the lower the delivery cost per unit of goods. Meeting customer demand while maximizing the size (and therefore reducing the cost per unit) of inbound shipments of goods should be the primary goal. There are various logistical methods that can be utilized to minimize the delivery cost per unit. Depending on the type of customer, retail or direct to consumer (e-commerce or mail order), there are a few options available to reduce the delivered cost.

What about negotiating the best prices for actually moving the goods via cargo ship, railroad, semi-truck, less than truck load (also on a semi-truck), or parcel carrier (Fedex, UPS, Postal Service)? The quick and simple answer is to partner with a logistics company that:

• already moves a significant volume of goods in order to get the best pricing from the aforementioned delivery companies;
• understands the most cost effective routes for those delivery companies (based upon where they move goods most cost effectively) and;
• doesn’t markup the rates of those delivery companies more than is reasonable for the market

Learn more about how Southern Fulfillment Services can handle logistics needs.  Click here for a quote or call us at 772-226-3605 for more information.