Freight Shipping Blog

Opportunity Costs of Logistics in US Manufacturing

Posted by Robert Snowdale on Fri, Nov 21, 2014 @ 11:47 AM


supply-chain-costAs a CFO in the manufacturing environment why should you be interested in your logistics and supply chain operations?  In larger manufacturing companies with sales of $250 million and up that is not typically a domain that most CFO’s or other C, V suite level executives get involved in. The setup, implementation and management in these smaller firms is generally left to tactical managers who have expertise, knowledge and practical experience in that realm.

Smaller manufacturing companies often do not have the personnel resources to reap the hard and soft dollar benefits of a “best in class” logistics and supply chain management approach. Such an approach  helps reduce costs of goods sold, days in inventory and overall hidden operational expenses Typically functional management in these smaller companies are relegated to a back room operation as these companies concentrate on their core business and growth within that core business. The opportunity costs can be significant and damaging to those smaller U.S. manufacturers who are trying to compete, excel and grow their market share in a space crowded with both domestic and foreign competitors.

While it is not realistic  that  CFO’s, CEO’s and other C, V suite executives in smaller U.S. manufacturing  should become subject matter experts it is possible to consider outsourced solution partners who can help realize the hard and soft dollar benefits of a competitive advantage in logistics and supply chain,

Most tactical personnel in smaller companies who are assigned responsibility in these disciplines would rarely if ever consider an outsourced partnership of this type for a variety of reasons.

Here are some reasons why C, V level suite executives in this space should be interested in an association of this type: 

  • Reduced Freight Costs

A reduction of a net 20% or more in freight costs will improve Cost of Goods Sold. This is made possible through leveraged volumes utilizing name brand carriers who can meet or exceed your service requirements while insuring continuity or improvement in order fulfillment, inventory management and customer satisfaction. Reduction in freight costs are also further enhanced by an enterprise approach ather than a transactional approach to freight cost management.

  • Realized Growth

Profitability enhances growth. A reduction of 20% or more in landed costs for inbound materials and outbound product sets the stage to allow you to compete in expanded geographical markets. An optimized logistics and supply chain function will help reduce the risks and barriers to serving your customers with maximum efficiency from order entry to cash and enhance your position as a preferred vendor, thereby achieving growth.

  • improved Customer Service

The simply stated objective of getting the right product, to the right location, at the right time at the price quoted and in good condition can be difficult to achieve without the advantage of a well -designed and executed logistics and supply chain system. Improved Internal and customer visibility to order and  shipment status combined with the right mix of quality core carriers with the most competitive costs and quickest and most reliable performance on transit times are just a few of the building blocks resultant from enhanced logistics and supply chain management. These building blocks go a long way to differentiating you from your competitors and gaining market share.

  • Enhnced Planning & Visibility
No one likes surprises and you don’t get many chances to prove yourself as a valued business partner. Logistics technology readily available through outsourced partners can automate manual processes, and improve productivity. Instant access to information increases the accuracy and predictability of forecasting and planning. More efficient scheduling of staff is another benefit of these technologies. Enhanced visibility of purchase order information, and real time shipment status facilitates more efficient scheduling and reduction of labor costs and best of all makes you a business partner who can be relied on.

In short Improvements in your logistics and supply chain management performance can dramatically increase your company’s operational efficiencies and maximize productivity. Real time information will result in more effective planning and allow you to anticipate the unexpected. Higher levels of customer satisfaction directly lead to closing the gap between your growth and revenue projections.

It’s a sad fact that more than 80% of smaller manufacturing companies do not have a logistics and supply chain strategy.

So what’s in it for C, V level executives to get interested in logistics and supply chain performance?

The answer is simple and compelling: A direct and positive impact on revenue growth, capital utilization and profitability. All of these improvements position your company as a preferred business partner and result in a significant competitive advantage.

Distribution Solutions, Inc. is a non-asset based Transportation Spend Management company providing freight rate analysis, negotiation and logistics and supply chain consulting services. 2014 is our 24th year of helping small to medium sized US manufacturing firms compete more efficiently in today’s extremely competitive market place. Contact us at 508-747-6200 Ext 14 for a no-cost, no-obligation freight cost assessment and analysis of your logistics and supply chain system. You may find out more about our services at

Topics: logistics transportation costs

The Impact of Transportation Services & Logistics Costs on Corporate Profitability

Posted by Rob Snowdale on Tue, Feb 17, 2009 @ 05:07 PM

Surely the days of viewing freight shipping services and logistics costs as a fixed cost are behind us right? Key corporate decision makers who are tasked with the measurement and management of all line item expenses surely understand the impact of and cost reduction opportunities represented by freight savings and logistics related expenses, don't they? 

Believe it or not, even in the devastating economy we find ourselves in, most companies miss the boat completely on this critical area for improving corporate profitability. Many key financial players at the "C" and "V" level assume their companies are doing all they can to directly reduce and control costs associated with delivering their product to market and sourcing and delivering materials used in manufacturing their products. Having asked, "so what do you spend per year on transportation services?" countless times of the person or persons within a company who is/are charged with buying transportation services, the usual answer is " I don't know". The old, but spot on adage in our business is, "if you're not measuring it, you're not managing it". The best way to measure it is through a freight bill audit and freight bill payment service that can allocate costs down to the sku level and provide a wealth of data useful in managing costs and insuring proper pricing strategies for your product.

Transportation and logistics related costs as a percentage of sales range from 9% to 14% depending on industry sector for companies who do not adopt a ‘Best in Class' management approach. These percentage ranges include all logistics related expenses such as warehousing, dedicated personnel, and transportation expense. Transportation costs alone comprise the vast majority of this expense for most companies.

By adopting a ‘Best in Class' logistics management approach, logistics related costs as a percentage of sales drops to 4% to 7% depending on industry sector. That's a delta of 5% to 7%. For a company with sales of $10,000,000, that's a contribution to corporate profitability of $500,000 to $700,000. How many widgets do you have to sell to net that kind of return? Maybe it's time your company adopted a ‘Best in Class' management approach to your transportation and logistics costs.

Topics: logistics transportation costs, transportation logistics costs

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