There are lots of mistakes commonly made by small and medium businesses when running their logistics operations. SMEs are under acute competitive pressure to perform and scaling up only magnifies the issues. Even larger businesses often don't have the expertise and resources to get the most out of their logistics. We see it all the time. Here's our top 7 logistics mistakes and how to fix them.
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1 Carrying too much stock or too little stock
The money you have tied up in stock is usually one of the most significant ongoing investments you have in your business. Just like any investment, the return will depend a lot on your skill in investing in the right stock at the right time. Fortunately, there are ways of doing this much more reliably for your business stock than there are for your stock market investments!
Too much stock will cost you money not only to buy, but to store. Your warehouse is an engine that burns cash whether it is standing still or earning you money. Lease costs, outgoings, electricity, pallet hire, capital costs and depreciation add up to a significant cost per pallet of storage. This can be anywhere from $3-$8 per pallet per week depending on your circumstance. This is one of the most under estimated expense impacts in business. Slow moving or non-moving stock not only depreciates in market value over time, but it accumulates storage costs that eat away profit margins and also have an opportunity cost of not warehousing and selling productive stock. Often the realization of this does not come to light until the warehouse is full and newly delivered stock must go into hastily arranged offsite storage. This will get the finance manager’s attention when a large and unexpected invoice lands on his desk!
Too little stock will cost you money in lost sales. Perhaps the most basic business rule if you rely on product distribution for your bread and butter, is to have stock available when the customer wants to buy. Unless you are tracking this lost demand, you may be blissfully unaware that it is even happening. Stock-outs will drive your customers to your competition in search of what they need. It is literally like handing them cash out of your pocket. You let your customer down and your competitor saves them. The loss of reputation and customer loyalty may never be recovered.
There are three things you need to do to fix this problem.
Warehouse Management Systems (WMS) have been around for over thirty years. They are one of the most significant ways of boosting warehouse productivity and can help enable productivity gains throughout the supply chain. Up until relatively recently they were very expensive large scale systems requiring significant computing power, expensive software, complex and costly implementation, and expensive industrial grade mobile computers. This kept WMS restricted to large corporations and a few of the larger medium sized businesses who could invest the millions of dollars required and still get a reasonable return on their investment.
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