March 15, 2022
How to Avoid Common Mistakes in Supply Chain and Logistics
Even as supply chains become more complex and diverse, the pitfalls may remain the same—especially for fast-growth retail and e-commerce businesses.
Here, we identify common supply chain and logistics mistakes your company can sidestep for a faster growth track.
Supply Chain Pitfalls
Fast-growth companies can stay on track by limiting product complexity, ensuring specificity in logisitics rollout plans, and maintaining cash control.
Product complexity isn't something you can always control, so companies can start by managing their number of stock-keeping units. These decisions are usually made early in the design process.
Ask a few key questions to guide your choices:
- How can a simple release solve your customers’ needs?
- What is the least complex product you could introduce?
- When is variety crucial? If it’s not, hold off on variants.
The advantage of a simple release is that you're able to learn from your customer base and then add complexity as you go. You could also consider postponement, by adding variety at the end of the production line.
If you make the wrong inventory decisions--either too much or too little of what you need—it can result in both scrap and availability issues. Customers may want none of one color, but more than you have ready to sell of another.
Options can be a pitfall, while simplicity keeps your business growing.
Lack of Rollout Planning
Rollout planning refers to when and where you ship your product. These plans need to be detailed, because every geographic introduction includes importation complexities, tariff implications, labeling documentation, regulatory challenges, and other trade strategies.
Again, simplicity is key. If it's possible to launch smaller to start, and then learn from your customers, that ends up being a much easier way to go.
If you do need to factor in multiple regions, start planning early. You may be able to test and design for multiple regions without actually shipping to those regions on launch. Then, when you do expand, you’ve modeled the scenarios and can maintain greater stability during periods of fast growth.
The third area to focus on is cash control. Money-related issues are one of the biggest reasons for startup failures. Even established companies can suffer cash flow issues, because there are many elements to consider here:
- Inventory cycles
- Material lead times
- Supplier payment terms
- Customer payment terms
For companies experiencing rapid growth, trade finance may help bridge certain costs, so that you can redirect cash into meeting demand or growing other parts of your company. Getting the funding you need, when you need it, can help you capitalize on opportunities.
Fast forward your supply chain with Flexport Capital. Cover your supply chain costs with trade financing from industry experts, so you can invest everything you’ve got in growth. With a simple application process, an average of two-week turnarounds, and low upfront costs–you can expand your inventory, plan your next product launch, and capitalize on every opportunity that comes your way.
On the logistics side, the market may create a great deal of stress for fast-growth businesses. If inventory-to-sales ratios reveal a near-stockout, growth could stall, or even collapse. Use these approaches to avoid situations that could threaten growth.
Import Data Analysis
At a high level, data is critical for making several key decisions for your company. For companies trying to keep up with strong demand, data can tell you which products to continue or phase out, what to launch, and when.
There are three important metrics to watch:
- Landed cost per SKU
- Cargo ready date to delivery time
- Quote to invoice accuracy
Landed cost per SKU is especially crucial in a logistics market with so many moving parts. This measurement can help you control costs, set consumer prices, and determine the health of your logistics immediately or across a longer period.
For Flexport clients, landed cost is easier to pull and display quickly than it is for companies using spreadsheets or other manual techniques. The Flexport Platform digitizes commercial invoices, packing lists, and all other commercial documents, so you can discover insights more quickly
Next, track the legs of your cargo journey, starting with the average time from when your cargo is ready to when it's picked up and the time between your cargo ready date to delivery.
Cargo ready dates can help you strengthen relationships with suppliers. If you have multiple suppliers producing similar products, you can take your information to your supplier and learn more about how production times could be improved or streamlined.
The third metric to help you avoid pitfalls is the alignment of quote to invoice. In other words, what is the difference between what you were originally quoted and what you were invoiced?
For example, if a supplier handles a shipment end-to-end, they may provide a quote based on certain weights and volumes. If the actual weight and volume at the port varies—due to packing variation, order changes at the factory, or simply human error—there could be a financial discrepancy.
Last Minute Planning
Next is last-minute planning. It's more imperative than ever to coordinate as early as possible with your freight partner. The logistics market is highly complex, and small details can have a major impact. Work as closely and proactively as you can.
If a new piece of information changes your logistics viability, you may be able to rely on premium ocean services, but market conditions today don’t lend themselves to last-minute changes.
When something changes, get in contact with your freight forwarder as soon as possible—even if it's three, four, or five weeks ahead of when the product is going to be ready.
Supply Chain Evolution
For fast-growth companies, it’s important to know that supply chain evolution can be just as fast or faster. The industry as a whole doesn’t stay the same for very long anymore.
As an example, if you change your warehouse in the U.S., you may find that it sets off a cascade of other issues to manage. Third parties can have their own SLAs or Covid impacts. Nearby ports may have varying levels of congestion that impact how easy it is to get goods out of the port and on the way to the warehouse. Congestion could impact detention and demurrage fees.
The advice for avoiding this pitfall is the same as above: Any time anything changes, communicate with your freight forwarder as early as possible.