Coming into the fall season we are all working on setting the budgets and initiatives that will be our priorities for 2014. We brainstorm to create a comprehensive list, cull it down to a select few, present it and compete against other departments to gain authorization and the dollars necessary to pursue.
Many logistics projects that would deliver great value are often shot down because they do not have the headliner, big dollar sales impact that other initiatives possess. So how do you compete for executive attention and gain approval?
Transportation spend as a percentage of sales is a tempting target. Many companies find their total global transportation spend as a percent of sales to be 5% or more. Certainly measurable, but not overwhelming. If you are in a budget battle that is centered on driving top-line sales, you're in a tough fight to win. Ultimately, our logistics projects compete better when we show how they bring profitability to the bottom-line. The key lies in showing how a smaller-scale project can have as much impact on profitability as a large-scale sales initiative. Consider this, if a business has a 5% net profit margin, a project that delivers $100,000 in cost reduction brings the equivalent net profit value as a $2,000,000 sales increase.
If we take a look at recent articles in Parcel magazine and presentation topics at the upcoming Parcel Forum there are a host of subjects that would make important initiatives for the upcoming year.
-- Evaluating your carrier mix and the role the Postal Service and Regional Carriers play
-- Tuning up your software, looking at a TMS and determining how to optimize
-- Negotiating your contracts, combating surcharges, auditing charges and performance
-- Optimizing your freight terms and controlling inbound shipping expenses
That list is just the tip of the iceberg of worthwhile project ideas that if not presented well, will be shot down and added to the list of missed opportunities that fell prey to bigger initiatives.
If you work for a public company you can easily obtain financial reports and determine net profit margin. If you work for a private company that information may not be so easily available. In that instance you will need to have a friend in Finance who can help; or, conduct research and make some assumptions on margin. In either case it comes down to doing the math and showing how project results make as meaningful a contribution to profitability as headline sales initiatives.
Presenting the financial case is extremely important in making the sale of your project to company executives. Our industry also contains numerous risk factors which if not addressed, could impact the ability to receive materials for production and deliver finished product to customers. Keep an eye on legislation and regulatory programs that increase the cost of doing business or limit infrastructure repair. Having near balanced carrier capacity in this slow growth economy would quickly change with an uptick in activity. And executives need to understand that carriers will not solve that dilemma simply by investing in new equipment. They can buy more trucks, but there are no extra drivers to drive them.
Your company is more dependent on your ability to sell your initiatives then you know. Good selling!
Doug Kahl is a Vice President with enVista, a leading supply chain consulting and transportation services organization. Doug can be reached at dkahl@envistacorp.com, 602-334-6233.www.envistacorp.com
Many logistics projects that would deliver great value are often shot down because they do not have the headliner, big dollar sales impact that other initiatives possess. So how do you compete for executive attention and gain approval?
Transportation spend as a percentage of sales is a tempting target. Many companies find their total global transportation spend as a percent of sales to be 5% or more. Certainly measurable, but not overwhelming. If you are in a budget battle that is centered on driving top-line sales, you're in a tough fight to win. Ultimately, our logistics projects compete better when we show how they bring profitability to the bottom-line. The key lies in showing how a smaller-scale project can have as much impact on profitability as a large-scale sales initiative. Consider this, if a business has a 5% net profit margin, a project that delivers $100,000 in cost reduction brings the equivalent net profit value as a $2,000,000 sales increase.
If we take a look at recent articles in Parcel magazine and presentation topics at the upcoming Parcel Forum there are a host of subjects that would make important initiatives for the upcoming year.
-- Evaluating your carrier mix and the role the Postal Service and Regional Carriers play
-- Tuning up your software, looking at a TMS and determining how to optimize
-- Negotiating your contracts, combating surcharges, auditing charges and performance
-- Optimizing your freight terms and controlling inbound shipping expenses
That list is just the tip of the iceberg of worthwhile project ideas that if not presented well, will be shot down and added to the list of missed opportunities that fell prey to bigger initiatives.
If you work for a public company you can easily obtain financial reports and determine net profit margin. If you work for a private company that information may not be so easily available. In that instance you will need to have a friend in Finance who can help; or, conduct research and make some assumptions on margin. In either case it comes down to doing the math and showing how project results make as meaningful a contribution to profitability as headline sales initiatives.
Presenting the financial case is extremely important in making the sale of your project to company executives. Our industry also contains numerous risk factors which if not addressed, could impact the ability to receive materials for production and deliver finished product to customers. Keep an eye on legislation and regulatory programs that increase the cost of doing business or limit infrastructure repair. Having near balanced carrier capacity in this slow growth economy would quickly change with an uptick in activity. And executives need to understand that carriers will not solve that dilemma simply by investing in new equipment. They can buy more trucks, but there are no extra drivers to drive them.
Your company is more dependent on your ability to sell your initiatives then you know. Good selling!
Doug Kahl is a Vice President with enVista, a leading supply chain consulting and transportation services organization. Doug can be reached at dkahl@envistacorp.com, 602-334-6233.www.envistacorp.com
