Logistics and profitability

In recent years, high fuel prices and inventory carrying costs have pushed logistics to the top of the list of expanding costs for most manufacturers. With costs likely to continue rising for the foreseeable future, business owners have no choice but to audit their warehouse and transportation logistics to determine where changes can be made that will improve efficiencies and save money in the process.

“Thanks to unstable fuel prices and the increasing costs of warehousing products, now is a good time to review your transportation and warehouse logistics,” says Richard Kopelman, CPA, a partner at Habif, Arogeti & Wynne, LLP. “With several options available, be sure to weigh each one and determine whether it may benefit your company the most.”

Focusing on warehouse location, making tough decisions about inventory and working with a reliable third-party logistics provider are just a few ways business owners can contend with the hit to their bottom line and, at the same time, make improvements to the overall efficiency of their processes and policies. To obtain sustainable cost reductions and truly optimize their logistics practices, manufacturers must conduct a holistic assessment of each of the points on the supply chain.

Smart Business discussed with Kopelman ways companies can trim costs in this challenging economic environment to streamline supply chain management and, in turn, cut costs and improve the quality of their operations.

What are some of the trends you see in logistics?

Many companies begin their analysis by reviewing what their customers are buying. Specifically, they look for regular, recurring sales patterns. In some cases, it might be possible to cross dock shipments. The fast turnaround on orders helps eliminate the need to store products in your warehouse.

One way to make a warehouse more efficient is to ensure that workers have easy access to bestselling items. If a warehouse has limited space, consider leasing an offsite facility to store slow-moving products.

Another option is to sell off old or obsolete inventory that’s taking up space in the warehouse. Even if you sell the products at a minimal cost, you save money in the long run by eliminating storage costs. If the items have little or no value, look into a recycling program that would help defray disposal costs.