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HOW LOGISTICS CAN SAVE YOU MONEY (AND HOW IT CAN COST YOU)

March 06, 2016 | Blog
Global logistics concept airplane truck train ship

It is a hallmark of global corporations that they are everywhere at once. Tim Friedman once said, “No two countries that both had McDonald’s had fought a war against each other since each got its McDonald’s.” How can these companies exert such influence over so many people in so many places? How is it possible that you can get the same burger in two different countries on opposite sides of the world, but you can’t a plumber that shows up on time?

 

The answer is that behind every global enterprise, there is a brilliant logistics team that is rewriting the book on how to do get things done on a massive scale.

It’s more than just getting things from A to B in one piece—a successful logistics operation will help a company grow by trimming the fat off of every detail and transaction so that it is as efficient and effortless as possible.

Because transportation, inventory, and warehousing can have such monumental costs, the only way to make them profitable is to integrate all of these services into a single, well-oiled machine with almost zero downtown and redundancy.

 

A brilliant example of this is UPS, which is well known as the one of the biggest shipping and transportation companies in the world. At their scale, UPS is looking to cut costs on transactions as little as thousandths of a penny. They have thousands of drivers on the road at any given time, constantly receiving and delivering packages, all the while making up to $35/hour, burning gas, putting miles on their vehicles, etc. So you can see how these costs can add up for a company whose service is supposed to be efficiency.

 

logistics companySo what did they do? They prohibited all their drivers making left turns. After years of traffic and cost analysis, they realized that their drivers were wasting a huge amount of time, money, gas simply waiting in the turn lane. Not to mention the added risk left turns pose to drivers, statistically speaking. Because their route delivery system was already completely automated, UPS was able to reprogram their routes to avoid left turns, saving tens of millions of gallons of gas, and even more dollars. Logistics at its finest.

 

Of course, not all logistics solutions are so dramatic. In fact, as they say about IT, you usually only notice them when something goes wrong. When supply chains are not integrated well, or cost-cutting measures compromise the reliability of a service, logistics failures can lead to a cascade of expensive setbacks. You can easily see how the idea UPS had could have completely backfired—what if this gas-saving strategy ended up making routes take significantly longer? What if drivers, frustrated with incoherent, illogical route patterns, simply broke the rules, took the left turn, and messed up their whole delivery schedule? Good logistics is as much about research, careful planning and analysis, and trust as it is about saving pennies on the dollar. A good logistics team will always go the mile to make it happen, because they know a job well done is its own reward.

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