Business Planning - Logistics: the fine art of distribution

Distributing products by road can be costly but steps can be taken to ensure efficiency, says Neville Stein.

Having an avid interest in military history, I recently visited the Royal Army Logistic Corps Museum at Deepcut and was impressed by the achievements, contribution and importance of this seldom gloried section of our armed forces. Here I learnt that the term "logistics" originally related to the movement and co-ordination of troops and everything they needed to the required location.

It is a discipline that has been vital in war since well before Boudicca leapt into her chariot and one that, fortunately for us, failed to supply food and provisions to the armies of Napoleon and then later Hitler. In those days, having things in the right place at the right time was a matter of life and death. Although it might still sometimes feel like that in today's business world, generally we have a lot more resources, and with forward planning logistics is a process that can be efficient and economic.

Business definitions

In the world of business, logistics refers to the "total flow of finished goods downstream from a place of production to the customer". Over the years, this highly important management process has evolved into "supply-chain management", a term defined by Nigel Slack et al as "managing the entire chain of raw material supply, manufacture, assembly and distribution to the end customer". Quite a big definition and quite a big subject. I have therefore decided to focus on just one element of the supply chain - the physical distribution of products by road.

For many businesses, particularly plant producers, distribution costs can be the secondor third-largest cost in the company. For others such as retailers, distribution costs can be low and may just involve one small delivery vehicle. Irrespective of how much is spent on distribution, like all management operations it is not rocket science and needs to be run efficiently. Follow these simple steps to help fine-tune your own delivery processes. Ask yourself:

- How much and how frequently do I need to deliver? Do I have seasonal peaks and where are my customers generally based?

- Do I really need to own vehicles? If deliveries are infrequent there will be a cost to having vehicles standing idle - maintenance, tax, insurance and the cost of employing trained drivers. Beware also of the "vanity factor" of owning branded vehicles. Yes, you can advertise and promote your name and appear a solid business, but the overheads can be large.

- Could my distribution be contracted out to a specialist third party? After all, a specialist should be able to fulfil the function more cost-effectively than you can and you may have means of getting compensation should deliveries go wrong.

- Should I hire a vehicle as and when I need, reducing the costs associated with owning? You will, of course, still need suitable delivery drivers but this can be very cost-effective, especially if you build up regular custom with a particular hire firm.

- Could I work with other local businesses to share their delivery resources or sell space on mine? Building up a co-operative network with businesses that deliver to the same places as you can pay dividends but requires regular communication.

Rising distribution costs

Perhaps one of the overriding concerns facing many companies in our sector, particularly as we have low-value but high-volume goods, is that the costs of distribution continue to rise year on year. Increased taxation, increased regulation and increased wage costs are all raising distribution costs. We also face the hidden and incalculable costs of traffic delays. So how can we make every journey economical? Having the right information and using it to plan is vital:

- Firstly, know your customers as well as you can. Plan ahead at least each month to know what needs to be delivered, but also what likely orders may come in based on previous buying behaviour.

- Anticipate your customers' needs and let them know yours. If you are going to be delivering in a region, let potential customers there know, so that delivery costs can be shared.

- Let retail customers know what Container Centralen trolleys you will need ready in the goods inwards yard so they can quickly replace those you have delivered.

- Obviously, the more everyone can co-operate in the distribution chain the less cost there will be to everyone, so flexibility is important. Could retailers consider accepting deliveries out of hours or at weekends, for example, at busy times - especially when they have staff working extra time anyway? There are health and safety issues to consider but, particularly in the fast-moving spring, late-night deliveries might just work and vehicles can take to the roads when they are quieter.

- Know your roads, routes and roadworks. If you or your staff are driving, invest in the best reliable gadgets to help plan the quickest routes and avoid potential problems.

- Respect your drivers. A content, non-stressed and motivated delivery man is a great company asset and an ambassador for a business. Train them in customer service and anticipate the needs they might have travelling to and from the delivery site.

- Review your delivery costs and efficiencies at regular intervals. Would you be able to say exactly how much a particular delivery run cost or know where to find the figures to work it out? Educate staff and customers about costs and be open to their suggestions for improvements.

Improving efficiencies

As your business grows and sales increase, clearly the distribution function will enlarge. Perhaps you could then improve efficiencies by bringing in an experienced logistics manager with specific skills and knowledge of the latest technology and software.

Tools such as vehicle tracking, space planning and route planning all have a part to play in improving your distribution function as long as someone knows how to use them. Maybe you have a staff member already suited to the role, in which case you should send them on a course to bring them up to speed.

As this is a big subject, I have just tried to stimulate some thinking about your distribution operation. Personally, even though I live near the A14 terminal at Felixstowe Port so drive alongside more than just a few lorries every day, I do like seeing them on the road. It reminds me we are a country of enterprise that really does "get things moving". We just need to make sure they are moving at the right time for the right price.

Neville Stein is managing director of business consultancy Ovation

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