How Logistics Drives Growth and Reverse Logistics Recovers Lost Profits

Jun 19, 2014 by

Logistics is the way goods are acquired, stored and transported, so logistics management therefore entails identifying and sourcing potential service providers including transportation service providers, distributors and suppliers, and evaluating them for competency and cost-effectiveness with the aim of identifying those offering the best combination of price and service.

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Due to what logistics management entails it’s rare for companies to keep logistics management in-house, with most companies outsourcing to dedicated logistics firms with the connections, experience, manpower and specialist capabilities to provide solutions for transporting their clients’ products, etc. between the point of origin and the point of consumption.

How effective logistics management drives business growth

Effective logistics management drives business growth in a number of ways, including:

–        Reducing time-to-market

Time is a prominent factor in asset depreciation because the longer it takes goods to reach the market the less they’re valued at. Effective logistics management reduces the time it takes goods to reduce the market by, amongst other means, reducing the time goods spend idle in warehouses, further reducing costs and driving profits by reducing storage costs.

–        Enhancing coordination throughout the supply chain

Enhancing coordination throughout supply chains reduces costs and boosts profits by reducing storage costs, reducing asset depreciation, enhancing stock turnover rates to mitigate obsolescence risk and improving customer satisfaction levels which results in enhanced customer loyalty.

–        Providing tailor-made services to gain a competitive advantage

Effective logistics management firms are able to provide their clients with tailor-made services that aid them in gaining a competitive edge. This could involve, for instance, tailor-made customs & quarantine services which reduce the time that goods lie idle at border crossings.

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How to recover lost profits through effective reverse logistics

Reverse logistics is the process of recapturing the value of returned products and it’s more complex than outbound transportation because of the unpredictability of the situation, i.e. companies aren’t aware as to when a customer might initiate the return of a product.

According to a 2010 Aberdeen Group study, the average manufacturer spends between 9 and 15 percent of total revenue on returns and although implementing higher manufacturing standards could also reduce these costs, effective reverse logistics could help the average manufacturer increase their profits by as much as 5 percent.

As all companies are different, management needs to comprehensively understand reverse logistics management metrics – processing costs + logistics costs + credits/replacements cost + asset depreciation = total reverse logistics costs – though they also need to work with a logistics firm with strong reverse logistics experience.

By reducing the cost of any of the components in the equation above the savings go directly to the company’s bottom line profits. Although reverse logistics is an often overlooked logistics process, it’s an excellent means of improving profits by reducing waste, plus effective reverse logistics management also enables companies to showcase what are known as ‘green credentials’.

Further benefits of effective reverse logistics management include:

–        Finding sources of hidden profits

There are a number of sources of hidden profits that can be uncovered using effective reverse logistics management, including maximising the return on assets.

Logistics firms play a major role in this by, for instance, facilitating the opening of an increased number of channels to dispose of/sell returned goods in any condition. However, this also requires attention to returned asset depreciation since this also plays a major role, albeit a negative one for the company.

–        Minimising external liabilities

External liabilities could include legal issues pertaining to the return of products, decreased customer satisfaction as a result of what transpires following the original delivery and any additional costs incurred as a result of the need for extra, unplanned transportation of goods.

–        Improving customer satisfaction

Customers typically don’t care how companies meet their product and service requirements as long as they’re met to their satisfaction.

With effective reverse logistics management provided by international logistics firms like Feltons NSW, companies are better able to ensure high levels of customer satisfaction before, during and after the original delivery, resulting in enhanced customer loyalty and greater profit margins.

Effective logistics management, including reverse logistics management, drives business growth and recovers lost profits – isn’t it about time you looked at your business’s logistics operations?

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