Logistics is one area most companies do not spend enough attention on because the savings that can be found here are seriously worth the time spent and this increases the profitability. I am amazed at how ignorant and lazy most people are by accepting the prices for what they are and not looking for by shopping around.
Over the weekend I sat down and had a meeting with my business partner who had flown in from Durban for the day. There was loads to discuss and consider as many things have changed over the last 4 years since we shut down the Johannesburg operations.
For one I now have a warehouse and with a little tweaking I could accommodate roughly 20 -30 pallets of stock. The convenience of this is quite big mainly as the more you transport the cheaper it becomes which ultimately increases the profit. Having a client next door also helps as there is no delivery costs and only involves a forklift travelling a few hundred meters.
The costings my partner had worked out did not seem correct on the first inspection and not wanting to make a loss or less profit I started to dissect his costings finding an obvious problem. He had not included the transport costs from Durban to Johannesburg which is costly and would have come off the bottom line if we had already quoted clients.
Once rectified e added another $0.10c per kilogram which is roughly $100 per pallet of stock which adds up very quickly. I am happy now the costings have been completed because this gives me a starting point getting those transport costs down which will increase the overall profit. This is what I do and what I am good at and expect to come in around the $0.05- $0.06 range per kilogram gaining an extra $40 profit per pallet.
Once this has been achieved I will then be looking at all his other transport costs because this is a clear oversight that many tend to neglect. Before starting up my business I used to handle this side of the old business which actually helped us survive the lockdowns before temporarily closing down the business due to a lack of raw material.
When you start to do the calculations they do add up very quickly because the savings on the logistics side will generate anywhere between $10k and $20k per year just for Johannesburg alone. This is money you are not looking for and would have thrown away which is kind of scary. So many other companies are falling into this trap and this is down to a lack of understanding the real values.
Paying attention to detail across all facets of a sale is a skill that many have lost and the short cut is to just increase the price maintaining your profitability. This is one of the reasons why most things have increased in price which is more down to laziness and ignorance than the actual cost rising. Yes prices have risen over the years, but you can claw that back by looking in other areas which will make your products stand out not haven risen as sharply as your competitors.
This week I expect to land the new account which is right next door to the warehouse and depending on how they operate the first order will most likely be either next month or in the New Year. Personally I am not one who believes in changing suppliers this late in the year and would prefer a start date in early 2025. This I will openly tell them which I know sounds rather odd as I am turning instant business away, but it is for the better.
