6 Things Every Startup Needs To Know About Logistics Processes

So, how do you actually do that?

At this point in your new company’s timeline, it is all about the logistics process. Logistics is anything that involves you moving product or raw materials and components between suppliers, warehouses, and the customers themselves. It is a complex operation with many hands and steps involved.

A large chunk of your startup’s success comes down to the efficiency of your logistics process.

Let’s use something as simple as the common pizza delivery as an example:

• You (the customer) order a pizza (the product) from Generic Pizza Company (the business) to be delivered.
• In the time you wait between ordering and having the pizza delivered, it has to be made. Dough and toppings (the raw materials and components) are put together in the kitchen (the warehouse) by chefs (the employees).
• Once the pizza is made, a delivery driver (the shipping method) has to get it to you. However, this driver doesn’t have an infinite amount of time to do that as they said you’d be getting your food in about 45 minutes.
• If they get it to you early, you’re thrilled and most likely give a great tip (the incredibly satisfied customer). If they get it to you on time, you’re happy because you got what you expected (the satisfied customer). But if the driver is late, you’re annoyed and frustrated (the unsatisfied customer). Finally, if they’re incredibly late or your pizza never comes, you are upset and angry (the incredibly unsatisfied customer and lost future business).
• This is the logistics process broken down in its most basic form. Customers order something from a company, the company fulfills the customers’ orders and the speed, cost, and condition that the product arrives in influences the customers the next time they purchase the same or a similar product.

However, the logistics process gets even more complicated when you consider how a company orders its raw materials and components, who delivers those, and all of the little steps that go into making that pizza and getting it to your door.

In this article, we are going to explore 6 things we believe every startup should know about the logistics process to improve it:

#1 Develop A Plan

Startups often have smaller budgets. Every cent counts, so it’s important to plan out every piece of the logistics process before you start spending.

Focus on production planning and demand planning.

When it comes to production planning, you need to know your lead times internally.

• Do you want to sacrifice speed for cost?
• Are you producing locally, nationally, or internationally?
• Is your warehouse half-way between your office and the production site, or somewhere else?

Knowing where your product is, where it will be, and where it has gone is key to this type of planning.

Demand planning means you understand, and if you’re experienced enough, anticipate what your customers demand. Quick delivery turnaround, low-to-no-cost shipping, and prompt customer service are great places to start, but you’ll come to know your customers best over time.

#2 Stay On Top Of Your Expenses

As you develop a plan, be sure to keep an eye on what you spend. Startups often have small budgets and there’s little room for unnecessary spending. Every purchasing decision you make will affect future purchases moving forward.

What’s most important to your logistics plan?

Figure out which cogs in the logistics machine are the highest priority and spend accordingly. Storage, suppliers, customer service, and more are all worth spending money on, but you only have so much to go around.

By creating a budget with key expenses, you know exactly where your money should go and what budgets can be trimmed down the road. There will always be bumps and emergencies, but as long as you track your spending properly, you can ensure a smooth logistics process.

#3 Be Ready To Spend

You can’t plan for everything. Logistics isn’t simple and things are going to go wrong. Products will be lost, manufacturing problems will pop up, shipments will get delayed, and sometimes customers won’t be satisfied. Issues like these are going to arise more often than you’d like but they’re par for the course in any business, startup or veteran.

Remember this golden rule.

Spend when necessary and cut back when you can.

Mistakes are going to happen and you’re going to need to be able to fix them. Be ready to expedite a shipment to rectify a mistake, or when you need to fill a big order in a short timeframe. Make sure the added expense is worth it. If it isn’t going to fix a problem, the money is better spent somewhere else.

The need to spend doesn’t always have to come from sudden problems. Sometimes company growth is rapid enough that it necessitates previously unplanned purchases. Take it as the sign of success that it is. As long as you’re diligent, you can even things out as needed.

#4 Scale Consistently

Don’t allow the growth of your startup to be undermined by poor scaling. The logistics process you implement is not static. As you reach more customers, ship more products, and expand to multiple markets, your logistics plan shouldn’t be left to fall behind.

Plan for the future no matter where you are in the present.

Always be on the lookout for changes that can be made down the road:

• New suppliers
• Alternative shipping companies
• eCommerce solutions not yet implemented
• Inventory management software

Each of these options will benefit you in the long term, especially if you are already prepared to integrate them.

Keep track of what will best assist your logistics process as your company grows, not after it’s already expanded. Trying to play catch up is only going to cost you more money and time than it’s worth.

#5 Get Multiple Quotes

Every option involved in your logistics process is not the only option. There are countless suppliers, warehouses, manufacturers, and logistics companies all around the world who are waiting to work with you. Saving money means shopping around. As a startup, that’s priority number one.

Quality and price are not always synonymous.

Depending on what you need, you can find amazing quality for an incredibly affordable price. Discounts, incentive programs, and making great deals are some of the ways you’ll be able to get the best combination of affordability and quality. Research multiple options for every piece involved in your logistics process. You’ll be sure to save a large sum upfront by doing so.

#6 Logistics Companies Are Your Friends

Understand where your strengths and weaknesses lie. If logistics is one of them, that’s fine. Recognize that as soon as you can before finding someone, or some company, to do the job for you. You can’t expect your company to be able to do everything. Even Amazon relies on multiple shipping companies to deliver their packages, Apple outsources iPhone production to China, and the latest Google Pixel 2 was created by LG.

You need to learn to work with logistics companies to fill in the gaps that you or your team can’t because that’s the smart thing to do.

Experienced logistics companies understand the industry more than you do. That’s their job and that’s why you need them. They’ve built connections that can be utilized that you might not otherwise have had access to. A logistics company can direct you to suppliers to meet your needs, inexpensive warehouses around the globe, or the perfect manufacturer for your products. No matter their cost, the benefits logistics companies will provide your startup will be immeasurable.

Create The Best Logistics Process For You

In this article, we’ve explained the different things you need to know about logistics in order to implement and create a smooth and streamlined logistics process. Use them to create the perfect plan to fit you and your startup. Speak to your team, listen to logistics companies, and keep on top of expenses.

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