Supply and Demand: Keep Your Logistics Plan from Draining Your Budget

Supply and Demand: Keep Your Logistics Plan from Draining Your Budget

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When logistics are a major business function, a significant portion of the company budget will be allocated to supply chain functions and services. That said, creating a logistics plan is not a one-time event—it must be an ongoing effort and analysis. The specifics of a logistic plan depend on the type of products or services that function as the engine of daily business transactions, however, as your business grows, the industry changes, and your vendors make adjustments, you need to adapt your plan. A proactive logistics plan is one that takes present and future logistical strategies into consideration. If you fail to update your logistics plan, it will start draining your resources. Keep reading to find the best ways to keep this from happening.

The Drive toward Cost-Effective Logistics

In product oriented businesses, supply and demand rarely remains static. The eventual ripple effect occurs when logistics managers must address a more creative plan for timely, cost-effective plan of action. For example, in large chemical companies, production may fall off when a competitor’s newest product proves more effective. The ripple effect is a reduction in production that necessarily means having to reconsider logistics related to shipping products to various customer destinations nationally or internationally. The logistics manager must maintain stricter vigilance over warehousing, shipping vendors and actual shipping time to coordinate a logistic plan that maintains budgetary constraints. Strictly monitoring changes in the industry as well as within your own business will allow you to avoid wasting money when demand drops.

Logistics Applications

Generally, the duty of the logistics manager is to arrange a cost-effective, seamless link between production, warehousing, distribution, shipping and shippers. To keep your logistics plan from draining your budget, consider implementing a warehousing software application that can quickly monitor significant changes in customer demand for supplies. This type of application can help cut production costs and shipping costs simultaneously. Also, with a ready source of monitoring, it may be possible to reduce unnecessary staffing. As mentioned above, you must be ready for constant changes in your supply chain management and logistical plans, thus, you must keep a constant eye on things. As the business owner, this constant monitoring isn’t realistic, but with the help of monitoring software you’ll be able to avoid costly problems before they hit.

The Importance of Logistical Estimating

One of the most important jobs of the logistics manager is to provide accurate estimations of costs related to logistics operations. By setting up a regular spreadsheet to compare production, warehousing, distribution and shipping costs, it’s easy to spot increases. The logistic manager should also create a regular summary of increases by vendors for packing supplies, if applicable, and shipping costs. In some cases, when budgetary constraints appear to indicate change is needed to cut costs, it may be advisable to consider multiple types of shippers. One other important feature of logistical estimating is the cost of additional or incidental fees related to production, warehousing, distribution and shipping. These may be in the form of taxes on certain types of hazardous goods or additional costs to ship bulk items or those that are not FTL (Full Ton Load) and need to be added as LTL (Less than Ton Load).

Many business owners are paying much more than necessary for supply chain functions due to their inability to anticipate changes and adapt their plans. While some logistic crises are unforeseeable, plenty can be done to avoid paying too much for these services. With an informed logistics manager, warehousing software, and a close eye on estimations or supply and demand, you’ll be able to allocate a reasonable portion to logistics without going overboard. As a new business, any money you save can be used in another sector of the company that might be struggling.

The information for this article was provided by the professionals at Meyers Transport Ltd, a shipping company in Montreal.

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