It is quite common in the manufacturing industry and in particular, the Chemical industry, to unwillingly and unknowingly adopt a culture of “if it is working just leave it alone”. This mindset may have been successful decades ago within process environments, but is quite dangerous in today’s financial and logistics operations. Failure to change or analyze the unbroken process for efficiency improvement will inevitably manifest itself in loss productivity and profitability. We are living in global economy where efficiency is the backbone of productivity and competitiveness. The collapse of an iconic company like General Motors should be a reminder that failure to change may be result to failure to survive in the new global economy.
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I was associated with a company that imports products from Europe. Each day, they receive a couple of containers from Europe and over the years have seen the cost of transporting each container from the port to the warehouse rise from $350 to $650. When you factor the incremental cost to the unit cost of the product it does seems very minuscule but in total their cost has gone up by $500K per year. This increase is camouflage under variable cost of goods. This company has laid off many employees due to slowdown in the business and price pressure from competitors but is not willing to take a look at the transportation cost because in general, it works. Again if ain’t broke, don’t fix it.
I have a very good, financially astute friend, who in conversation told me that his family consistently buys cars from a particular dealer and how they’ve always managed to pay list price without any additional cost… I did say list price not invoice price. As it turns out, the dealership had been providing the cars to my friend at a price that had enabled them to make a significant profit. The same is applicable in the transportation industry where the carrier will charge the list price in an effort to maximize their profitability. Companies like ChemLogix, who specialize in negotiating the best rate for their clients and their freight payment services will audit and make sure an optimal rate are applied. Conversely, many freight payment companies, especially the big ones, simply pay the carrier their asking rate, and in many instances will end up paying list price. While these companies may be good at getting the best utility or cable rate, when it comes to a specialized field of chemical transportation, a company the only focuses on the chemical industry can be much more adept at obtaining and enforcing the best rates overall.
As my mother used to say “A penny saved is a penny earned”; savings from your transportation cost does go to your bottom line. Companies should take a look at their freight costs, including freight payment services, make sure it is good fit and stop paying list price like my friend. ChemLogix will make the process painless and stress free as possible.
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, just take a look, a check up every now and then is a recipe for a better health. We do it in our personal life, do it for your company.