Article by By Walter Scremin, CEO of Ontime Delivery Solutions
Inflation returning creates greater urgency for Australian manufacturers to review their supply chain and logistics efficiency, as cost blowouts are common in this area.
And it’s not just fuel costs. The bigger picture is that transport and logistics often represents a top five cost of doing business for manufacturers, hence efficiency gains have a meaningful positive impact.
There is no one-size-fits-all solution to building greater efficiency into your logistics, but addressing the following issues can result in positive change towards more resilient, high performing, and cost effective transport.
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Do you understand all of your key metrics?
This includes measuring efficiency performance such as your cost per delivery, or your DIFOT (delivered in full on time) score. The latter is important for controlling costs because the more accurate you are in delivering items in full, on time, the less likely you will be dealing with customer complaints.
Improving your DIFOT score should also reduce non-deliveries or failed deliveries. These can often result in one order being delivered two or three or more times, putting strain on the system and incurring extra costs.
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Reviewing all costs
The other key metric to consider is your total delivery transport costs. But this requires real honesty.
Manufacturing businesses are often hampered by ‘hidden costs’, such as wasted management time, which is where management spends too much time chasing up delivery issues and dealing with minor spot fires. Hard to measure, but a true drag on performance. Bringing all costs out into the open is a key starting point to future efficiency gains.
When considering inflation, the major logistics cost items are vehicles and infrastructure, and reassessing these can lead to greater inflation resilience.
When it comes to vehicles, manufacturers need to ask whether they need the number of vehicles they have. Is the configuration correct for current needs, or is it based on past needs? Are the vehicles older and therefore subject to greater running costs? Should they review outsourcing as a solution rather than purchasing new vehicles?
When it comes to infrastructure, there are key questions around the size of warehouse, the warehouse practices that can influence efficiency, and warehouse layout. It’s also worth asking if a 3pl or 4pl solution could be more efficient.
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Flexibility is sanity
Flexibility in logistics leads to more responsive delivery solutions, which both control costs and allow you to make the most of business opportunities. Consider the benefits of being able to scale delivery resources up or down at short notice, and why this might have even greater impact in a high inflation environment when the need to control costs is more acute.
Less flexible in-house fleets, with limited resources and large fixed costs, are usually the most vulnerable to unexpected cost blowouts.
They are often using older vehicles, which incur greater maintenance costs and have poor fuel economy.
Flexibility is achievable – the key starting point is understanding your capabilities and establishing a fleet structure which can be responsive to your business.
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Use telematics tracking technology
Telematics tracking technology is essential for route optimisation, which improves the speed and accuracy of deliveries, and is the most efficient way to reduce fuel costs.
The technology has benefits for business intelligence, to track parcels, assist with proof-of-delivery, and to track vehicles and machinery to ensure they are being used properly.
All business should analyse the number of delivery runs per day, using telematics, as part of an optimisation strategy. For example, reducing daily runs from three to two means fewer vehicles on the road and greater efficiency.
Fuel use is also revealed via telematics, including data on excessive idling in vehicles and the inappropriate use of vehicles (such as drivers going off schedule).
Without optimisation via telematics you risk wasting valuable time and money taking inefficient routes, with a higher incidence of lost or misplaced deliveries, and higher fuel bills.
The best telematics systems provide total transparency, allowing you to monitor deliveries and receive real-time updates.
