All businesses are bound to experience some bumps in the road in the course of their corporate existence. From the logistical challenges in smaller companies to the complexities in supply chains as they grow and mature into a full-blown enterprises, one’s fate in the business world is determined by how one responds to these challenges.
In the US, a small business is defined as any privately owned and operated business with no more than 500 employees and a relatively low volume of sales. With these constraints in human and financial resources, small companies must think of creative ways to manage their supply chains and take all the good opportunities that will help them deliver the best customer service. Here are three things small companies can do to avoid making logistical mistakes.
Solution #1: Take Advantage of 3PL Providers
Isabella Adams, a fashion accessories and home decor business based in Tampa, Florida, made a smart move to partner with third party logistics provider Transplace to keep up with its larger competitors. The small company, which serves more than 300 retail outlets worldwide, takes advantage of Transplace’s logistics knowledge and experience, bargaining influence, and technologies while it focuses on its goal to outmaneuver the bigger fish in the sea. Isabella Adams used to leave its shipments in the hands of the national freight forwarders but ended up disappointed. Transplace, on the other hand, offered solutions to overcome various logistical problems such as when products are held in customs, among others, and thus, a more efficient and cost-effective choice.
Small companies also have an option to work directly with a carrier. Leg Avenue, a provocative costume manufacturer based in Los Angeles, California, chose to partner with UPS after seeing the challenge in delivering a large volume of small packages. Lingerie, hosiery, and adult Halloween costumes in particular are stored at the carrier’s hubs at an earlier time and are released once orders are placed. UPS, which accounts for about 95% of Leg Avenue’s shipments, also ships these products to retailers and distributors overseas and offers a software that allows the company to better manage inventory.
Both solutions offer services that are best suited for each client. By handing the logistics side of the business over to a 3PL, Isabella Adams was able to reduce its production costs and deliver its merchandise within a span of 24 to 48 hours. Leg Avenue, on the other hand, sought the help of a carrier to focus on core business issues.
Solution #2: Get on the Tech Bandwagon
Just like multi-billion dollar conglomerates, small businesses must learn to embrace new opportunities and adapt to more sophisticated technologies. Since most shipping companies have now become automated, smaller companies have the opportunity to manage their businesses more efficiently and to reach their customers at their fingertips. Companies can save up to $5 per package by processing their waybills electronically, as shipping companies charge up to $5 for these documents.
However, opening one’s doors to technology also entails keeping information systems updated so that the company can continue to be competitive and remain in the playing field, together with larger competitors. Big names in the logistics industry spend about $1 billion each year upgrading their technology. They come with the latest softwares, which can track all business transactions and allow customers to follow the progress of the delivery from the moment their package is shipped until it reaches their doorstep.
Growing companies can also invest in Software as a Service (SaaS) technology to optimize their shipments with web-based services. This can help prevent cases of wrong orders, lost packages, and late shipments with everything being tracked online.
Solution #3: Plan. Plan. Plan.
The Younique Boutique, a small cake topper company based in California, was delighted to receive an order from a TV production company. However, the order was changed at the last minute from 12 to 280 toppers without knowing where the destination would be, resulting in an estimated $800 loss. This common mistake of guesstimating the cost took place because the company decided to add an extra US $5 for each topper and rushed to ship the order from China, where her manufacturer is, to the production set in Hawaii.
Poor approaches to planning is one of the supply-chain weak points that result in higher costs, according to logistics expert Professor Alan Braithwaite. Even big companies fall into the trap and suffer customer-service disruption and management tensions, not to mention financial loss. The best solution is to be prepared for the worst case scenario, even if the chance of a disaster seems unlikely.
Logistical challenges vary depending on the size of the business. In a small business, these challenges are usually caused by mistakes in decision-making such as guesstimating costs, refusing to adapt to new technologies, and failing to plan ahead of time, which could lead to fatal consequences for your business. Keeping these things in mind can help small businesses better prepare themselves for the challenges before them.