Return on Investment Doesn’t Always Mean Lowest Cost

It used to be when a business looked for return on investment (ROI) from its logistics provider, the provider would be expected to find the lowest cost carrier.  End of story.  Now however, it’s not that simple.

Instead, logistics providers looking to help achieve maximum ROI take a more macro look at a customer’s overall supply chain, and utilize several efficiency tools.  The result is often a leaner and meaner supply chain that improves efficiency across the supply chain – but does not necessarily look at lower transportation costs as the defining bellwether of its success.

For example, in a recent World Trade 100 article, Douglas Waggoner of Chicago-based Echo Global Logistics noted that “achieving a truly meaningful return on investment is a matter of having a good, integrated solution that uses best-of-class transportation providers, technology, the optimization of the flow of goods, and the reduction of work-process expenses.”

Bringing together “experts” to offer input on various parts of a business’ supply chain – and then having them compare notes and arrive at a comprehensive solution – is central to achieving better ROI.

And what should be on the agenda when those experts meet?  A few key points:

• Process Improvements: The first thing a logistics provider should do, is to dissect the inner-workings of each part of a business’ operations, and make sure that there is no overlap, and that all divisions are on the same page and working toward a common, clearly defined goal.

• Regulatory Analysis:  Is there a process in place to make sure that a business is in full compliance with all necessary regulatory mandates, and that no unnecessary penalties or fees are accrued?  And, is there a mechanism to ensure that the business is achieving maximum tax incentives or, if applicable, favorable trade treatment?

• Continuous Improvement:  It’s also important to look at ROI as an ongoing goal, rather than a short-term achievement.  Hopefully, a logistics partner will have established a long-term relationship with its customers, and will fully understand the business needs and priorities of that business.

• Open Mind:  Finally, it’s important for businesses to understand that technology and supply chain management have evolved so much in recent years that processes that were considered cutting edge a few years ago, may now be obsolete.  Businesses need to be open to new ways of doing things, listen to advice, and not be afraid to try new strategies.

So next time a business wants to ensure that it is receiving maximum efficiency from its logistics provider, it’s important to talk in terms of improving ROI across the board, rather than just looking at one piece of the overall pie.