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4 Inventory Management Lessons to Learn From Successful Logistics Companies

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Small logistics companies should always be looking for ways to up their game. Chances are there’re a lot of inefficiencies baked into your processes just waiting to be found so you can save boatloads of money.

A recent study found that 43% of small businesses either don’t track their inventory or track it manually. And 55% of small businesses either don’t track their assets or do it manually.

Yikes.

a man standing in front of a chart presentation showing freight and money symbols

When you’re spending 20 to 30% of your entire budget on maintaining and managing your inventory without focusing enough on ruthlessly efficient inventory management, you’re leaving a ton of money on the table.

You need to improve, and the key isn’t looking sideways at your competitors but up at the big dogs of the industry. How do successful logistics companies do it? What lessons can you learn from them?

Here’s what successful logistics companies do

We’ve got four lessons you must take to heart if you want to streamline your logistics operation and start boosting profit margins within the next year.

1. Be proactive with technology

No one would accuse Amazon of being afraid of technology. The online retail behemoth owes much of its success to its bold implementation of new technology to streamline logistics and inventory management.

These days, the company is using robots to do much of the work that humans used to do. Amazon has been at the forefront of automation in logistics, figuring out how to integrate robots in its warehouses in totally new ways.

Amazon even has its own robot development company—Amazon Robotics—which it bought for $775 million back in 2012. Today, it has more than 100,000 robots worldwide, with more on the way.

The lesson for your business:

You probably don’t have hundreds of millions of dollars to drop on your own robotics company, but you should be monitoring your industry for new advancements in similar technology. Drones are a good example of innovative tech that can help you check on inventory, conduct surveillance, and even ship packages far more efficiently than you’ve been doing to date.

2. Small adjustments add up

Georgia-based United Parcel Service (UPS) is one of the largest logistics companies on the planet, with nearly $66 billion in revenue in 2017 and over 400,000 employees.

The company shipped around 750 million packages during the most recent holiday season alone.

Those are big numbers, but for the logistics giant, it’s all about getting the little things right. That’s great news for a small logistics company like yours, because it means UPS has practices you can implement yourself.

Rayford Collins—supply chain customization expert with the UPS Customer Solutions group—says that a simple step such as keeping boxes and packing material close at hand can have a major impact.

“Anything you can do to reduce steps in the warehouse is important.”

You can also strategically position inventory to minimize space and labor costs.

The lesson for your business:

Carve out some time to watch your floor operations, and consult with your employees. Do workers have to walk 10 feet every time they need to pull a box? By rearranging everything, you may be able to shave a few seconds off, which adds up as you deal with thousands upon thousands of products.

3. Watch industry developments closely

FedEx is another logistics behemoth, but in the first few years after its launch the company struggled. In 1974—just three years after its inception—Federal Express (its name at the time) was losing more than $1 million per month.

Founder Fred Smith managed to save the company in the 11th hour by convincing investors to pump $11 million into the business, but it wouldn’t thrive until a 1977 legislative change removed restrictions on routes operated by all-cargo airlines.

FedEx took advantage of this major industry development and completely changed how it did business, purchasing seven Boeing 727-100s, which were much larger than the aircraft it was currently flying.

Just a year later, the company went public, and six years later it reported revenue of $1 billion.

The lesson for your business:

You have to get out of your own world if you want to be successful in inventory management. A lot of outside factors affect your business, and you need to be familiar with other industries that you interact with. By understanding changes in international law, economic shifts, and the increasing role of technology, you can make better big-picture decisions that will guide you to greater profits. Read newspapers and trade magazines, and attend industry conferences. These things will matter to you sooner or later.

4. Good software is absolutely essential

Small businesses aren’t great at tracking inventory most of the time. Modern inventory management is too complicated to leave to manual processes or—shudder—no process at all.

Fortunately, the fix is pretty straightforward: good inventory management software.

DHL, another big name in the logistics world, simply wouldn’t be able to operate without good software. Their warehouse management systems monitor and control all warehouse processes, communicate with customs, and record all events and activities associated with each package, to name just a few capabilities.

No major logistics operation can neglect inventory tracking, or attempt to manage it manually. Why should you? These days, software can automate tasks that take hours out of your workday if you try to do them manually.

Software can manage your suppliers, keep track of shipping, trace packages, manage your warehouse, create custom pricing models, and just about anything else involved in inventory management.

The lesson for your business:

If you don’t have an inventory management software solution, or if you don’t like the one you do have, it’s time to go shopping. Capterra’s directory has 320 software listings as of this writing, which can be sorted by desired feature and compared side-by-side. Explore the features available, sign up for some software trials, and give the ones you find most intriguing a test run.

Become an inventory management master

If you’ve made it this far, you know that there’s a lot more to learn when it comes to inventory management.

To go beyond the big picture stuff and get into the nuances of what it takes to manage inventory effectively, dive into these pieces:

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About the Author

Dan Taylor

Dan is a content writer at Capterra, specializing in hotel management, construction and real estate. Outside the office, he enjoys spending time with his family and friends, catching up with the latest offering from HBO or paying a visit to a new place.

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