If your business involves shipping, your logistics management deserves a great deal of focus. Typically, in companies that ship, transportation costs account for a significant percentage of your company’s financial components. More importantly, transportation represents the first and final leg of your supply chain. So, fine tuning logistics is an important part of your budget.
In most businesses, allocating budget to automating and optimizing transportation activities can result in huge savings. And people incorrectly believe that a single shot IT purchase of ERP solution will take care of every transportation need that will arise. But when the company ships significant volumes, problems crop up. This is problem numero uno in budgeting logistic management. So, take time in deciding what specific needs the logistics team has, before making an IT purchase. Typical factors include transportation contracts and rates, customer delivery requirements, load planning and optimization, carrier integration/connectivity, and freight cost accounting/settlement.
A TMS(Transport Management System) is of utmost importance to an organization that involves shipping. Along with a robust TMS, dedicated personnel to handle it are a high priority. A common problem that most companies see is that logistics issues are seen as peripheral issues. These can escalate quickly and cost the organization majorly. So, a good communication system keeping senior management in loop with the TMS is a necessity. And it averts errors caused due to lack of senior management counsel. Typically, a good TMS can pay for itself. That’s what statistics say.
In several places, the first team to bear the brunt of a staff reduction is the logistics team. This can hamper the supply chain massively. So, the budget calls for holding on to logistics personnel in lean times. Tread with caution before wielding the axe.
Before working on a budget for the logistics management wing, it is prudent to understand project complexities. So, budget teams need to be realistic about expectations and timelines. It requires proper attention, professional project management, and sufficient resources in Logistics, Operations, Customer Service, Accounting, and IT.
Time it right!
It is a good practice to begin budgeting approximately 10 months into your current fiscal year, and complete the final iteration no later than two to three weeks into your next one. If you start the cycle too soon, you might not have enough year-to-date data for accurate projections. If you do it later, you risk interfering with the following year’s achievements.
Remember, that logistics is a crucial part of your business. Any day, if you choose to delegate it to the peripheries and mess with the budgets, you stand to face severe Supply Chain management repercussions. So, decide wisely and make amends if your yesteryear budgets haven’t been fruitful in the logistics wing. And do remember that a TMA takes time to reflect on your bottom line. Give it time before you decide if it’s working right for you.
