Logical solutions consulting
Distribution, as a rule, is a geographically distributed type of business, and that is why logistics is one of the most important aspects of business for companies working in the field of distribution since the stability and timeliness of purchases and deliveries directly affect the retention of old and the influx of new customers, and the profitability of enterprises depends on the cost of logistics operations.
As the experience of foreign distribution companies shows, up to 80% of the company’s revenue can be provided through the provision of logistics services. Many foreign companies, especially American ones, have evolved from purely distribution companies to logistics operators over time.
The essence of logistics chain management is to plan, track and ensure the efficiency of the movement of inventory between suppliers, manufacturers, distributors, and dealers – all the way to the end-user. A clear and efficient organization of logistics solutions is becoming a very important factor in improving competitiveness.
Why does the logistics factor become critical for wholesale and distribution companies?
You can give a number of arguments:
1. Logistics costs account for a significant share of the price of the goods sold. If we try to estimate how much logistics operations cost the company, what is their cost, we will see that logistics costs make up a significant part of the company’s costs, especially in the field of distribution. Therefore, even a small decrease in them can significantly increase the net profit. Optimization with the use of information technologies reduces the cost of individual logistics operations, fragments of logistics chains and entire processes, and affects the total logistics costs.
2. An equally significant factor is the acceleration of logistics processes, which is achieved both by reducing the time for performing logistics operations, and by optimizing the processes that ensure the movement of goods and cargo, which in turn helps to win the sympathy of customers. In the face of strong competition, this is a strong argument for distributors who intend to improve the efficiency of their business.
3. Another argument is to increase the stability of supply. In fact, who among the distributors would not like to have the name of his company associated with reliability, stability of supply? Of course, this largely depends on the discipline of the partners with whom the company works, but do not underestimate your own ability to control the movement of goods and cargo. Failures within logistics chains are not uncommon, but in an optimized chain, it is possible to compensate for their impact on the process as a whole by using near-real-time planning.
4. One of the main directions of the strategy of distribution companies is to focus on priority types of business and operations, in particular in logistics. This contributes to the rational allocation of enterprise resources to those types of business that are competitive and in which the firm has certain advantages, or in other words, “core competencies” (core competence).
5. Another important aspect is the need to use the latest information technologies for optimization. The modern supply chain is unlikely to function effectively in the conditions of “patchwork” automation of participating companies, which is rather the norm for Russia. But this will lead to the fact that the company will not have accurate and timely information about the resources and, accordingly, will not be able to influence the logistics processes in the right way.
Competition in distribution is gaining momentum, and this process is intensifying. To increase the competitiveness of distributors today, it is necessary to effectively organize the joint activities of all divisions of the company. Modern trends in the development of the market put distribution companies in front of the need to improve the efficiency of their logistics chains, which implies the exclusion of unproductive operations, minimizing the consumption of material, labor, and financial resources throughout the supply chain from the supplier to the consumer. By rationally managing product inventory in procurement and distribution, logistics help to reduce overall costs, reduce the price of goods and, as a result, improve the strategic position of the trading company in the market.
Lang Yeon Consulting Company offers a number of methods for optimizing the work of distributors, developed taking into account best practices, which allow you to achieve the following results:
achieve a reduction in logistics costs and a reduction in total costs by consistently analyzing and optimizing the margins of all links in the producer-consumer chain (reducing costs in the value chain);
improve the quality and efficiency of logistics services by optimizing and automating business processes;
receive operational information about the state of material and related (information and financial) flows for making management decisions;
avoid the occurrence of bottlenecks in the sales and supply process;
As a result, it will increase the company’s overall revenue, reduce costs, and strengthen its strategic advantages.