Why logistics software is important
The addition of software to your logistics department will optimize daily and long-term transportation plans and scheduling, carrier selection, route planning, inventory management, and small parcel shipping, which can reduce costs.
While a software investment may cost at least $10,000, improving your shipping processes will allow you to serve more customers and increase profits in the long run.
“Some businesses shy away from the investment of software, but technology provides techniques that can increase the size of each shipment,” says James Moore, vice president of sales, Ryder System Inc. “Software can tell you your savings if you can get customers on board with two-day shipments instead of same-day, and the rates will be automatically lower for them and you.”
A common transportation management issue has businesses keeping more inventory on hand than necessary. This typically happens when stock is manually cataloged instead of tracked with software. This means more of your money is sitting in warehouses instead of in your pocket.
“Companies don’t need to keep a ton of extra people on board when they don’t have work for them and the economy is down,” says Cynthia Cabrera, lead consultant and president of Global Solutions & Services Inc. “Less people also means less to plan. Software can be very useful as long as it is necessary for your operation and the people using it know what they’re doing. This can save you a ton of money, but like everything else, you have to have a reason for it and know what return to expect.”
Software can help you evaluate your needs for warehouses, your fleet or the need of third-party resources. Before making a software purchase, you need to assess what areas of your process are in greatest need of assistance. While some companies package their software options, others individualize the programs for specific areas of interest such as shipping and loading.
“Load building is one area where errors can occur,” says Karin L. Bursa, vice president of marketing at Logility, a provider of collaborative supply chain solutions. “Using software to maximize the load’s efficiency can save you 5 to 25 percent a year, carrier reduction will go down 1 to 5 percent and the audit/payment process will be reduced by another 1 to 3 percent. This could mean a 10 to 40 percent cost reduction, with ROI inside of 12 months. Most software companies will also provide continued support and upgrades as part of ongoing service plans.”
Human error is a big part of what can go wrong in logistics. Depending on the volume of orders you are receiving, this can add up. The use of software can eliminate these errors and make your inventory and tracking easier to manage. Software can also determine the best carrier for a particular type of shipment and contractual agreements.
“Efficiency means better customer service,” says Jamison Day, professor, University of Houston, C.T. Bauer College of Business. “Software helps you move through the process better, faster and cheaper. If you don’t have the capabilities to purchase all of the necessary software but your company relies heavily on shipping, you should consider a third-party logistics firm.”
Experts say that two-thirds of all Fortune 500 companies use third-party logistics companies for some aspect of transportation, warehousing or inventory management.
“If you decide to perform this part of your business in-house, the cost of the system will need to be reflected in what you charge customers in transportation freight fees by 4 to 7 percent,” Moore says. “IT solutions can provide you with answers to whatever your particular needs are.”
The benefits from buying the right software for in-house use or finding the right outside firm, will include more efficient route scheduling, reduce the need for extra inventory, delivery times, no empty hauling, reduced overtime, possibly less employees and less fuel use. These factors save money directly and by increasing customer satisfaction, creating loyalty and perhaps a willingness to purchase more goods through your company.
