Operating Margin

Improve Your Operating Margin through Smarter Logistics

Profitability is critical for the long-term survival of companies. Smarter logistics is a great way to improve operating margin, allowing more of each sale to go into the profit coffers by reducing overall costs. Here are some great ways companies can use improved logistics practices to improve profits.

Smarter Transportation
There are a lot of costs to be cut in transportation for many organizations. Reducing wasted cargo space, smarter routing, utilization of LTL carriers when applicable, and more efficient fleets are just some of the improvements possible. Reducing transportation costs to provide a bump for profit margins may require the implementation of more intelligent transportation management systems.

End to End Collaboration
When the entirety of the supply chain is in close collaboration and ideas, KPIs, and challenges are shared freely across an organization, cost-cutting solutions may come from surprising places. This change requires more a shift in culture and operations rather than the tech-based solutions many of these improvements require, but it doesn’t make it any less a move towards smarter logistics.

Implement Margin-Based Optimization
The idea behind margin-based supply chain optimization is that companies focus in on products and customers that offer maximum profitability. This requires taking a good, long look at operations and gauging the operating margin that each project offers. Companies need a clear view of their goals, plenty of accurate data, and technology to aid in the optimization to implement this system effectively.

Opportunities to Improve Profit Margin Aren’t Always Internal
Sometimes, the best way make more money on the dollar isn’t to change things within your organization’s supply chain, but to reach outside of it for more cost effective solutions. Maintaining a fleet isn’t a cost-effective option for many companies, big or small; they might save by using a 3PL provider.

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Independent research shows that improved supply chain management can yield:

  • 25 – 50% reduction in total supply chain costs
  • 25 – 60% reduction in inventory holding
  • 25 – 80% increase in forecast accuracy
  • 30 – 50% improvement in order-fulfillment cycle time
  • 20% increase in after-tax free cash flows
  • Supply Chain Mapping

  • Review Market Conditions

  • Determine Operational Inefficiencies

  • Outline Opportunities

  • Implement Changes

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