Small Business Logistics Strategies You Need to Know to Maximize Efficiency and Reduce Costs

Posted on July 11, 2023 | Updated on July 17, 2023

Even though small business logistics typically involves less stock and distribution coordination than larger companies, it’s still just as complex. Fewer employees and resources are available to ensure a streamlined process. Small businesses can benefit from supply and distribution tips. 

1. Leverage Technology

Leveraging technology is one of the best small business logistics tips because it’s accessible. Most options are affordable or easy to learn. An extensive amount of equipment exists for virtually any storage, management, or distribution task. 

Small businesses looking to incorporate hardware or software into their logistics process should look for devices that increase productivity or revenue. For example, certain Internet of Things technology solutions can automate operations to ensure rapid fulfillment. They’re typically incredibly efficient because their functions are data-driven and precise. 

Most can benefit operations in multiple ways outside of their primary purpose. For instance, implementing an artificial intelligence platform to track inventory changes could reduce labor costs. Leveraging technology may be initially expensive, but drastically increasing efficiency can pay off over time. 

2. Improve Collaboration

Since most small businesses only have up to four employees, communicating with every party in logistics takes time and effort. They must consistently track every interaction and relay it to the relevant individuals. Improving collaboration can streamline the process and make it much more manageable.

Initially communicating the importance of prompt responses is critical because it determines both parties’ expectations. They should be clear and firm when explaining their needs. They can also establish routine meetings with their suppliers or distributors as frequently as they need. It can help to get everyone on the same page.

Alternatively, they could use a digital solution. For example, an enterprise resource planning system can store all data in one place, allowing for better collaboration. It standardizes information storage and access, which helps everyone share documents and stay informed.

3. Budget Appropriately

Storage, distribution, and fulfillment involve many costs, but inventory is one of the biggest. As such, spending is a chief concern for many small business logistics processes. Although industry specifics determine the exact percentage, around 15% – 25% of the total budget is reasonable for most. 

Since insufficient cash flow is the most significant challenge for around 33% of businesses, budgeting for appropriate inventory levels is crucial. Those who are just starting out are better off with smaller amounts of stock until they determine demand.

4. Compare 3PL Partners

Many organizations turn to third-party logistics (3PL) partners for assistance. They typically manage transportation and inventory to streamline order fulfillment. While they’re a popular choice, options oversaturate the market. Finding the most affordable one can seem like the best choice for a small business owner with little capital, but they’re better off comparison shopping.

Every 3PL partner provides different services and benefits. For instance, some may offer inventory management software or provide multiple distribution centers. A complete evaluation can help identify which one best contributes to operational success. 

A business should also assess its logistics needs and see how the 3PL partners’ offerings align.  It should look for options with enough space to store all its products safely. In addition, it should consider those with customization options. More features may be more expensive, but it can be worth it if it finds one that can meet its needs and perform reliably.

5. Consistently Balance Stock

Many small businesses offer online shopping experiences to their customers because it’s a clear opportunity for growth. Experts project over 15.2 million e-commerce shoppers will enter the United States market by 2027. While having an omnichannel model can increase revenue, it may also cause challenges.

Balancing e-commerce and in-person sales with product levels can make small business logistics complex. Miscalculations can lead to out-of-stock items, resulting in fewer sales. A functional operation requires continuous updates to reflect inventory accurately. Companies should consistently perform checks to ensure their records align with reality.

6. Plan for Delays

According to the United States Census Bureau, nearly 40% of small businesses had domestic logistics delays in only one week in 2021. Even when they’re not shipping things internationally, getting things to customers on time can still be challenging. Fixing such situations is imperative for success.

Many things can disrupt the supply chain, so businesses should always prepare. For example, a shipment may get stuck halfway to the customer because of prolonged severe weather. Alternative suppliers, warehouses, or distributors can help stabilize inventory levels during delays. Additionally, a reliable operation can attract more customers in times of uncertainty. 

Small businesses should consider reaching out when a delay occurs because it can be a frustrating experience for customers. They can offer some clarification and empathy to put the situation into perspective. In addition, offering discounts or promotion codes could improve brand reputation and increase consumer retention.

7. Account for Returns

People send things back all the time, especially after shopping online. For instance, retail products had an average return rate of 16.5% in 2022, accounting for over $816 billion in merchandise. Even if they reorder, the business still loses some profit because they must pay for additional transportation and storage costs. The same concern applies to goods stolen after delivery or lost in transit. 

Products always have a chance of being defective, stolen, or lost. Most small businesses should pay more attention to reverse logistics when establishing their original process. They can budget for such situations so they don’t affect profit. In addition, they can implement policies that limit return windows.

8. Track Customer Behavior

People create information trails whenever they interact with a website or make a purchase. Small businesses can collect it for vital insight. Tracking customer transactions to identify spending patterns allows them to market better. Also, appealing to a niche group often helps them thrive in competitive industries. 

Companies commonly collect data by digitally tracking customer interactions. They may also do their own market research by conducting surveys or publishing questionnaires. It gives them direct insight into their target demographic. They can then apply it to their inventory management process and stock more of what will actually sell.

If that’s not feasible for a minor operation, they still have the option to use similar market research. They can look at consumer metrics from their industry and apply them to their own business practices. Afterward, they can monitor conversions and sales to see the change’s impact. It’s not as accurate, but it’s an excellent option for those who want to test it without investing too much time or resources. 

Plus, it often benefits the customer. Most appreciate accurate recommendations and customized marketing attempts because it aligns with their interests. Tailoring the shopping experience increases overall satisfaction significantly, resulting in up to 15% more conversions on average. Tracking customer behavior can drastically improve the small business logistics process.

9. Routinely Double-Check Stock

A cycle count is an essential part of any small business logistics process. Basically, it’s a physical tally of products that improves the accuracy of records. It accounts for all current, incoming, or outgoing items. Companies can use it to maintain the appropriate amount of stock, ensuring they can meet consumer demand. Minor errors are always possible. People and technology commonly make miscalculations, so double-checking their data is crucial.

Navigating Small Business Logistics

Small businesses often have to coordinate a lot to ensure the success of their logistics process. Things like integrating technology, accounting for potential losses, and regularly confirming the accuracy of stock levels can help make it easier.

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