Know your customer

The key to optimizing your logistics network is to understand your customers. Compile a list
of where your customers are located, the expectations they have in regards to delivery, and
what products and services they demand most. Make note of both repeat and one-time
customers as well; each type can provide unique insights into areas where your logistics
network may be improved.
Evaluate your Business

In conjunction with knowing your customer, you should determine what objectives best
align with your business. Is your primary focus on reducing costs? Or does your company
strive to maximize quality and customer service? Perhaps your company would like to
expand into a new geographic area, or is planning for the release of a new product line.
Take all of these factors into consideration, and strive to find a balance that best suits both
your customers’ needs and those of your business.
Mode of Transport

Choosing the right mode of transport can be the difference between meeting urgent service
demands, saving thousands on shipping costs, or potentially both. Shipping via air typically
ensures your freight will move quickly, but often at a higher cost. Shipping via ocean,
however, may reduce costs significantly at the expense of longer transit times. For ground
or domestic shipments, consider both truck and rail options when available, and also water
routes. In certain cases, chartering an aircraft or ocean vessel may be the best solution to
your shipping needs, especially if you have a significant amount of large or bulky cargo to
ship all at once.
Distribution Centers (DCs)

Distribution centers serve as local storage and handling facilities within a larger logistics
network. They are typically positioned closer to customers to provide faster delivery times
at reduced shipping costs. Some companies opt to have just one, centralized distribution
center for all their customers, while others establish a vast network of DCs spanning
multiple regions. Localized DCs allow for the fastest shipping to customers in a specific area,
as opposed to shipping direct from manufacturer to each customer individually. However,
the more DCs you have in your network, the more complex your shipping plan becomes,
which may impact visibility.
Forward Stocking Locations (FSL)

When expensive, time-sensitive products fail, it could cost a company millions per day until
repairs are made or suitable replacements are provided. Even worse, as a supplier, your
technicians may not have this expensive equipment on-hand; therefore it must be ordered,
and your customer has to wait for it to be shipped. This is when a forward stocking location
could be an invaluable asset to your logistics network.
Like a hub or distribution center, FSLs serve customers (or other DCs) in a specific region or
area, but with the added benefit of storing stock long-term and stock which may have
already passed through customs from its origin. Instead of waiting for replacements to be
shipped from the manufacturer, what if your technician could simply locate, pick up and
deliver parts to the customer same-day for exceptional customer service? This is where FSLs
provide the greatest benefit, and may either be owned outright or rented as storage space.
Then when stock is used, it can be replenished at your convenience, which may even allow
for consolidation.
Consolidation

If you ship products to the same destination on a regular basis, such as a DC, it may be more
cost-effective to consolidate shipments that share the same origin. Although the rate per
unit of weight or volume may be similar, savings can be realized from only paying for one
shipment as opposed to multiple, smaller orders. Some carriers also prefer that you ship in
bulk, as this allows for them to fill trucks and containers more quickly. For this reason,
carriers and freight forwarders may offer you a discounted rate if you consolidate your
shipments.
Building Blocks

As you evaluate your logistics network, take time to carefully review the factors listed here
and make note of how they currently serve to your shipping needs. If you’re building your
network for the first time, be sure to refer to your customer and business goals as a guide
for how you should arrange your network. Then when you re-evaluate, consider the
alternatives of each factor for feasibility and cost. Additional opportunities for savings come
from careful planning if you re-evaluate and continue to monitor your network frequently.