Mar
It’s Time for Your Clients to Pay Attention to Logistics
As a key service provider to your clients, you know what’s keeping them up at night. Finance. Innovation. Talent. Compliance. Cybersecurity. These are just some of the many concerns CEOs and other C-suite leaders are trying to tackle head-on in 2020. Trade and economic factors rank highly among them — and depending on who you’re talking to, some believe it’s the greatest threat their companies will face throughout 2020. But when it comes to the importance of logistics in business planning and strategy, this critical function is often further down on CEOs’ lists than it should be.
While supply chain as a whole — which certainly includes logistics — is a concern with the ongoing tariff negotiations, what about the goods that are here, right now? It’s important to plan for and focus on the future — i.e. suppliers, goods, and services that your clients are working toward, but it’s just as important for companies to focus on what they have to work with now. It’s this inventory that companies can put to use and derive the greatest benefit from as opposed to goods that are en route to a warehouse or facility.
This Isn’t Just an Industry- or Department-Specific Challenge
Those who benefit from manufacturers and distributors such as retailers, hospitality, the food industry, and countless others all depend on timely, cost-efficient transportation of goods throughout their organizational footprint. But without an understanding of how important logistics are in business, a company can’t gain the advantages they need in cost reduction, service levels and performance, and overall market competitiveness.
You might be thinking that this is more of a supply chain or logistics team concern. But consider: could Amazon have become what it is today without understanding the importance of logistics in their business? Could they be delivering orders the same day or next day if logistics weren’t a core component of their leadership team’s strategy? In this post, we’ll explore three ways that logistics plays a significant role within an organization — and what your clients’ CEOs and C-suite executives should know about them.
1. How Logistics Influences Cost — and Profit
The business importance of logistics often goes unconsidered when it comes to costs. Any organization that moves a product from A to B is spending money to do so. Just as so many other areas of a business are constantly being evaluated and re-optimized to improve efficiency and reduce costs, logistics should be as well. It can be easy for leadership to focus on global or political events, building innovative teams, and other concerns that do have an effect on bottom lines but often in a non-immediate, more long-term manner.
However, CEOs and other business leaders need to have an understanding of how their organizations are operating and performing logistically. This is because logistics makes a direct, continuous, and long-term impact on their organizations’ bottom lines. It’s not a one-time function — it’s the never-ending circulatory system of how an organization works.
That impact is experienced on both sides of the organization’s supply chain as well. Upstream, how is logistics driving down costs for materials and goods coming into the organization that allow them to do what they do best — whether that’s producing a good or providing a service? Downstream (and this is often where the greatest financial opportunities are), how is the organization optimizing the transportation of those goods to the endpoint where they stand to make money (e.g. a retailer, a customer, etc.)?
If you’re thinking that your clients’ CEOs have an understanding of the importance of logistics in their businesses, what does that information look like, and what are they doing with it? Is it just a weekly, monthly, or quarterly report? Or is it data that the organization is actively making efforts to improve upon? In the long run, this information and reporting might be managed by you (the service provider) or another team within your client’s organization, but the data must still be reported back to the CEO or C-suite. It’s critical that these business leaders understand how they can use that information.
2. How Logistics Influences Service
We all understand the vital role that service plays within an organization and that there are multiple levels and types of service. For organizations that ship and receive goods as part of their business model, logistics has an affect on service as well. It impacts when customers receive their goods, their condition, the resulting impression made on those customers, and ultimately the perception of the client as the manufacturer, supplier, etc.
It’s important that CEOs and other leaders understand that logistics is the method by which an organization’s promises to its customers are fulfilled. Supply chain manages the way those products are sourced, built, and so on, but only logistics gets them from A to B. If a logistics partner or strategy fails, then the company has failed to uphold its promises, customers become upset, trust in the brand/business is lost (and once lost is not easily regained), and the bottom line suffers. The hole dug from a logistics failure is not easy to get out of, and while time is spent trying to repair the damage, the organization must still move forward — creating a persistent negative effect where future gains aren’t as strong as they could’ve been had logistics pulled through.
Conversely, a well-oiled and optimized logistics strategy not only delivers on promises but continually makes them better and more delightful for customers. Goods are delivered on time, and with optimization, can be shipped or delivered sooner than expected. Adhering to SLAs becomes easier and more efficient, and turn-times can even be shortened. Long-term, the business and its bottom line benefit from delivering positive experiences and upholding agreements with customers and partners. Make sure you’re communicating the business importance of logistics to your clients as it pertains to service.
3. How Logistics Influences Competitiveness
A finely tuned logistics strategy and approach to continual optimization can help an organization gain more market share while its competitors lose ground. Cost and service are both influencers here. By helping your clients improve their logistics, costs — both in how goods and materials are brought to the organization and how they are delivered to customers — can be improved over time. This creates a compound reward in that expenses are continuously reduced and margins (and thus profit) are up and to the right.
On the service side, efforts made to improve logistics produce more and more positive results with customers. Parts replacement is more efficient and expedient, initial orders are delivered on time, and the organization lives up to the expectations customers have of it. This builds trust, which is key to repeat business and business growth. If that trust is maintained through continual logistics optimization and improvement, the organization can rise above competitors who may be too focused on other competitive tactics — tactics that don’t make a consistent and repeatable impact on the bottom line.
Depending on your clients’ long-term strategies, logistics can even influence business valuations and eventual sales or acquisitions. For example, if a company has a well-oiled logistics strategy, that makes them a prime target for acquisition (or a reliable strategic partner by a company they’re targeting). If a company did not have strength in logistics, the valuation might not come in as high, and the acquirer might place additional terms on the arrangement knowing that they’re assuming more risk.
Put Your Clients in the Best Position Possible
Whether you’re a trusted service provider such as an accounting firm or a strategic partner with an ownership stake in your clients’ businesses, you understand that optimization is a company-wide and ongoing effort and that logistics makes a daily impact on your clients’ bottom lines. Make sure you’re using that insight to help clients understand the business importance of logistics to reduce costs and increase margins.
If you believe that your clients’ executives aren’t giving logistics the attention it deserves, a complimentary logistics health check from Brady Partners can provide the insights needed to place this function on leadership’s radar.
Contact us today to speak with our expert team and discuss next steps.