2.4.25 Factors Influencing Logistics Networks

Factors influencing logistics networks. When you build your logistics network, you trade-off two important factors. The one is cost, the other one is service. If we want better service to our customers, we probably have to spend more money. But logistics networks are already expensive, so most companies try to reduce those costs as much as possible while still maintaining a high-level of service. The cheapest logistics network looks different from the most expensive one. Nevertheless, the concept of cost versus service always applies and you can have a logistics network with only one warehouse and overnight transportation, which will give you great service, but it will be very expensive. Or you can be like Amazon and have top customer service, two-hour deliveries in some cases, but you need over 100 warehouses for that. Nevertheless, you have to pick the network that minimizes cost and gives you the best service possible. We’re in the middle of Amish country and Urban Outfitter, a major clothing retailer based in Philadelphia, Pennsylvania decided to build their warehouse right here. The reason why this location was, [NOISE] and there goes a UPS truck. The reason why Urban Outfitters chose this location, probably has to do with the proximity to their home office, their commitment to the local area and the ability to distribute up and down the eastern seaboard right from here in Lancaster county. It also behooved them that land was much cheaper here than in other locations and they were able to bring jobs to an economically distressed area. Two major drivers affecting logistics network are the cost of money, interest rates and the cost of fuel driven by the cost of crude oil.
The way the impact logistics network is as follows.
When interest rates are high, the cost of holding inventory goes up, because most of the money spent holding inventory is cash tied up that you could use otherwise.
When fuel costs are going up, remember, fuel costs are the single largest expense of most transportation, the overall cost of transportation goes up.
So when transportation is expensive, you want to have less of it. Therefore, you need more warehouses.
When you have to spend a lot of money holding inventory, you want fewer warehouses. So as you see those two economic drivers that most companies do not have any control over, impact how their logistics networks should look. And it is important to anticipate where does factors are going to be in the future, so your network Is as up to date as possible. Nevertheless, you can make small adjustments by using rented warehouses and evolve it over time to make sure that your cost is as low as possible while delivering the best service possible.

Jim Rohn Sứ mệnh khởi nghiệp