How to Make Logistics and Delivery the Drivers of Growth for Your Small Business
With the aim of providing you with useful information in developing your business, we hope this article helps you better understand the following elements:
- How a well thought-out and efficient supply chain can improve your business
- How to set up and adapt logistics techniques to optimize your business
- How to apply the key factors to achieve a great product delivery experience and increase customer satisfaction and retention
- How other techniques, such as the management of partial deliveries, returns and consignment sales are real commercial levers
1. What a Thoughtful and Efficient Supply Chain can Bring to Your Small Business
For an entrepreneur, caring about the logistics process means giving yourself additional ways to save money, while meeting the growing demands of customers. Hence, you need to identify the elements of the supply chain on which you can act. Indeed, logistics is not just about transportation!
What does the term “logistics” really mean? Logistics concerns all flows, both upstream and downstream, products and materials that constitute the commercial activity of the company. The notion of flow is the one that allows to the structure and organization of the company to “cross through”.
Generating revenue, developing margin and maintaining sales are critical concerns for any entrepreneur.
However, the management of supplies, stocks or deliveries is essential, even if they might seem constraining in terms of being time-consuming and repetitive. An already overburdened entrepreneur might think that the management of the logistics aspect will pull him away from the strategic dimension of developing of his company.
If the customer, however, perceives a real benefit when buying from you, we can then talk about added value for the customer.
You increase the chance of your business’ success when you:
- ensure that the customer receives the ordered product in good condition and at the right time
- promptly arrange an order of a product necessary for the progress of one’s project
The golden rule for guaranteed customer satisfaction is defined as PCT, or:
2. How a Small Business Can Improve its Logistics Approach
Just like a music conductor who coordinates his orchestra, the entrepreneur must know how to identify and coordinate his resources to manage the flows harmoniously and respond optimally to customers.
> Three essential steps for a solid logistics approach
1. The customer pre-order phase
- Product availability: for example, the ability of the company to meet future orders on the basis of its available stocks
- The duration of a delivery cycle: from receipt of the order to product delivery
- The variation of this delay: for example, a three-day cycle that may vary by one day, more or less
2. The delivery phase
- Accuracy of invoices and deliveries in relation to the customer's order (for example: delivery address)
- Respecting the customer's request: for example, delivery from Tuesday to Friday, from 9 a.m. to 12 p.m., or constraint of individual packing or by batch
- On-time delivery (OTD) within the promised timeframe
- Delivery with the quantities desired by the client
- Delivery of products in good condition
3. The order follow-up phase
- The existence of a customer service if the order does not meet the preceding points
- The possibility of offering à la carte services if the customer wishes, such as product training, maintenance or repair, POS loan, and more
> Transitioning towards a just-in-time (JIT) stock management method
While stocks become increasingly expensive as they get closer to the end customer, efforts are being made to limit stocks that are costly in terms of cash, storage space, and handling, in addition to stock that remains unused (depreciated or even unusable due to deterioration, drop-in demand or obsolescence).
What is JIT management? JIT involves ordering raw materials or end products only when they have to be used. One of the aims of this method is to eliminate intermediate stocks.
JIT can only be applied if the company, customers and suppliers all agree. The company must also:
- Properly estimate production needs
- Buy locally to limit costs
- Check the reliability of the transport and delivery network
- Have strict stock and order management
- Be with a responsive team
JIT Advantages & Disadvantages
- Reduces storage costs
- Limits waste
- Increases the quality of finished products
- Involves taking risks and requires perfect coordination
- Requires regular orders
- Few suppliers accumulate stock in place of companies using JIT
The JIT method can be tricky, but it has many advantages for a small business. It requires all parameters in the supply chain to be optimized and an efficient management software, allowing for a high traceability.
Today, a small business can seek to move towards a JIT approach, without making it a 100% stock management method.
3. A successful delivery process is crucial for your customer satisfaction & retention
Factors to Achieve a Great Product Delivery Experience
It is essential that customers obtain the product or service they want. A warehouse must be well stocked, thanks to optimized stock management and stock-shortage alerts. To avoid wasting time, it is also important (especially in cases of multiple warehouses) to be able to find the ordered product simply and quickly in your storage area.
In a world influenced by immediacy, products must be delivered on time. Your ability to deliver quickly and on time is a real competitive advantage.
Not only is the quality of the product important, but also the way the product will be handled and packaged for a smooth shipment. In addition, compliance in terms of quantity is critical. For wholesale businesses that process orders in large quantities, they must have an error-free order entry beforehand, an accurate product listing, and reliable and readable shipping orders for the order pickers.
Haste makes waste, and a broken product or errors due to a hurried delivery are not good scenarios. The goal is to deliver a product without breakage and without complication. Tracking systems are offered by all logistics providers, enabling customers to track the location of their parcels in real time.
The "last mile"—the distance between the warehouse and the customer—is the most expensive one, not only in financial terms, but also in reputation if deadlines are not met.
4. Other Techniques as Real Commercial Levers
> The challenges of managing customer returns
The ever-increasing demands of consumers require companies to be more attentive and to offer a range of services with highly added product value. Customers, for example, want to be able to return items in their preferred way, regardless of the purchase channel used initially. E-commerce has increased considerably the number of customer returns (size problem, color, etc.), and the quality of returns management has quickly become a competitive advantage: free return, immediate refund, nearby pickup points, etc.
It is imperative, therefore, to be able to put these products back on sale as soon as possible to:
- avoid immobilization by encouraging rapid restocking
- preserve margins, since products have shorter lifespans and obsolescence lurks around any non-vigilant company
- increase profitability by putting these returns back on sale as potential sources of new sales
Be cautioned, however, that the management of these returns can quickly become a real problem for all distributors, from a logistical and financial point of view.
The Golden Rules for Optimal Returns Management
Have at your disposal automated technological tools, enabling:
- immediate update of stock levels
- real-time item-tracking
- easy stock movements (in and out)
- easy invoicing management with the option of issuing credit notes and refunds
- the ability to process multi-location inventory sales and returns
Benefit from efficient logistics for:
- rapid parcel handling by a trusted service provider
- controlled costs
- possible shipment from one customer to another without going through the warehouse
Using appropriate technology optimizes the downtime of returned items and offers new services to their end customers (e.g. product return). Distributors also benefit from a new lever of profitable growth. They will have more flexibility and, as a result, will be more competitive, since they are able to respond to the new demands of retailers.
> How to manage partial deliveries to optimize customer relationships
What is a partial delivery? Among the new customer requirements and delivery constraints, the option of being able to deliver orders partially is a real plus. A partial delivery makes it possible to deliver the same order in several times. Each delivery generates an invoice. The price charged will be the one on the day of your order. A single sales order is therefore sufficient.
How does the customer benefit from receiving partial deliveries?
- They can benefit from discounts or preferential prices by ordering larger quantities at once.
- They avoid receiving and managing too much stock at once.
- They receive the available products immediately, without having to wait for others still in production or in transit.
Why does your small business need to know how to handle partial deliveries?
- To increase customer experience and satisfaction;
- To speed up the inflow and outflow of stocks and avoid downtime;
- To promote sales opportunities, since option of offering partial delivery can be a decisive factor during commercial negotiations.
Example : Slippers distributor
Suppose you sell different kinds of slippers to a network of retail stores. As a distributor, you buy your slippers from an Italian supplier. One of your customers, a retailer, orders a large quantity from you because it enables them to benefit from preferential rates. On the other hand, the production of certain color models is delayed and it is, therefore, not possible to deliver the whole order.
By mutual agreement, deliveries can be staggered according to your supplier's production schedule, and the customer can receive his order on several dates. In this way, he can start selling and spread out his payments. On your side, it prevents you from keeping the stock too long and incurring storage costs. You are also able to invoice your customer immediately.
The constraints of partial delivery:
Partial delivery might seem simple to implement but, in reality, the process is relatively laborious. It requires:
- perfect coordination of services
- stock management that is flexible and fully synchronized with order management
- the possibility of issuing several delivery notes and invoices from the same order
- a feature to reserve part of the stock, pending product shipments, because if quantity in question is allocated to another recent order, you won’t be able to ensure other shipments to customers, impacting your customer satisfaction.
Remember that partial delivery requires a powerful inventory management software or ERP software, such as erplain, because partial deliveries are often a source of errors if they are managed manually or with an unsuitable tool.
> Consignment sales as a business development tool
How consignment sales work
When you are a small business marketing a new product, it is sometimes difficult to find a retailer or a wholesaler willing to take the risk of investing and buying even in small quantities. So, how can you give your product a chance and still enable it to be on the shelf?
Selling products on consignment means that your products are shipped to a customer who only pays you if the merchandise is sold. The retailer is called the consignee and has the right to return the unsold merchandise to you without further obligation on his part.
On the one hand, poor product visibility is not ideal, nor is the fact that the store incurs no financial risk and they may not try to promote your goods. On the other hand, consignment has the merit of exposing your products to the end customer—a scenario that is better than products locked away in a warehouse.
The bottom line: It's up to you to encourage customers to buy.
Entrepreneurs should not hesitate to change their vision of the logistics aspect of the company, and they should no longer assimilate it to transport alone, which is still often the case.
By better controlling the different aspects in the supply chain, a small business owner can exercise better strategies to improve growth and customer retention. Hence, a wholesaler is able to develop a real competitive edge that supports customer relationships and satisfaction—keys to success!
Other resources for small businesses:
- Top 5 Reasons to ditch the spreadsheets and take your inventory management to the cloud
- How to Calculate Inventory Turnover and Improve Your Business’s Cash Flow
- Our story - from a small business entrepreneur to a small business win-win partner