Approximately 10 % of all costs in industrial companies and around 30 % of all costs in commercial companies are related to logistics processes. For this reason alone, companies should regularly examine the efficiency of their own delivery processes and make optimisations.
The global economy has rarely been as dependent on smooth logistics processes as it is today. In times of crisis, effective supply chains not only ensure a reliable supply of all kinds of goods, but also keep everyone healthy. However, if you look at the topic vaccination logistics in the past week, it becomes clear that effective supply chains alone are not everything. Transporting a product from A to B is a core task and therefore an industry standard.
In order to remain competitive and above all profitable in the long term, companies should continuously check the efficiency of their current and effective processes, and optimise them. Logistics IT solutions such as TIMOCOM’s Smart Logistics System, which offer interfaces to transport management and ERP systems, are an established support here.
The big difference: Effectiveness vs. efficiency
Both terms suggest a positive and meaningful perspective on processes and companies. The definitions illustrate well the differences:
- Effectiveness refers to the performance of a process or service, i.e. the ratio of achieved to defined goal.
- Efficiency, is often It refers to the relationship between the success achieved and the effort required to achieve it, for example the costs. The benefit is always greater than the effort.
For manufacturing and commercial companies, this means that effectiveness must first be ensured in order to subsequently create added value by increasing the efficiency of all company processes. Put simply, companies should first “do the right things” and then “do things right”. In the following section we will explain the approaches and questions that manufacturing and commercial companies can use to increase their efficiency.
Increase efficiency with five questions
The core task of logistics is structured as follows:
To deliver the desired good, at the agreed time, at the specified place, in the ordered quantity, with the promised quality, at a reasonable price to the right customer.
The factors initially refer to the effectiveness of the processes in terms of achieving a goal. If just one of the sub-tasks is not implemented, the supply chain is disrupted and the order is considered “not fulfilled”.
Distinguishing features and opportunities to increase profitability only emerge when companies also look at their orders and processes and consider the efficiency of these elements:
- Time: Do we know the delivery status of our service providers and partners at all times and can we then plan our tours in a time-optimised and reliable manner? Can we react to eventualities such as traffic jams quickly?
- Location: Do we select resources such as hauliers, trucks and warehouses in optimal locations to avoid detours and empty runs?
- Quantity: Do we use capacities optimally to ensure maximum utilisation of vehicle loading space?
- Quality: Do we find the right service provider for each order so that product safety (e.g. through refrigeration) is guaranteed at all times?
- Price: Do we select resources or service providers in such a way that they have an optimal cost-benefit relationship? Can we reduce process costs and thus become more profitable or competitive?
Efficiency in the supply chain therefore aims to streamline processes and successively optimise quality, time and transport costs. Often, the quickest and most effective way to achieve this is by cooperating with certain partners or integrating software. Especially in the case of orders peaks or to minimise the risk, the aim is to distribute the orders among various partners. The effort involved is kept low, while the high degree of flexibility creates added value. The basis for this is a complete overview of one’s own processes.
That special something: IT solutions like those from TIMOCOM
An important issue is the reduction of bottlenecks that can lead to delivery delays or cancellations. TIMOCOM customers can use the freight exchange integrated in the Smart Logistics System at any time and thus react quickly to requests and find ad hoc offers or service providers that match their need. This means that order peaks can be dealt with at any time without losing quality or speed. An even greater effect can be expected by customers who have previously outsourced delivery or storage orders entirely and would like to gain more control through the system. Transparency is also an essential building block for efficiency in the digital world. Real-time tracking, where the data can also be used for ETA calculation, optimises time and cost intensive processes such as dock or warehouse management, for example. Disruptions in the supply chain due to traffic jams, for example, can also be integrated into decision-making or follow-up processes in real time. Empty runs and waiting times can thus be reduced and profitability increased at the same time.
Do you already use a TMS or ERP system to dispatch your goods? Connect it via interface to IMOCOM’s Smart Logistics System and become part of alogistics network of over 45,000 verified European companies.