LFA-technology foundations

 Obstacles in decreasing logistics expenses

Most companies possess real potential to reduce logistics costs, but these opportunities are not realized in most cases. There are two main obstacles to accurately defining potential for improvement and achieving goals: 

• Lack of knowledge and experience in cost analysis: Employees of a company may have only limited access to information on best practices of companies in the same industry. In addition, they may also lack experience in mapping improvement-driven results against the costs of potential improvement. The members of logistics department can also fail to accurately calculate the total value of a company's logistics function and may not be fully qualified to use this financial information effectively in convincing company decision-makers. Even companies possessing highly qualified staff may not have the time to carry out a detailed analysis and adopt improvements.
• Financial and time constraints in attracting external consultants: Many consulting companies provide services which help identify potential system improvements which may help increase company value. Although attracting professional consultants is reasonable in this situation, companies often seek a more rapid and less costly method of conducting research to determine necessary improvements and calculate potential financial implications.

Consistent with LFA methodology, clients gain measurable results with less time and money by introducing logistics auditors into the management chain.

 Basic LFA principles for unlocking hidden value.

Understanding logistics cost drivers and applying progressive methods will consistently help unlock hidden logistics value. LFA applies three main principles in developing effective logistics strategies:

• Principle #1. Linking supply chain strategy to overall corporate objectives. Each time a company develops a new strategy, for example in sales, market positioning, or customer relations, a logistics strategy should also be clearly defined.
• Principle #2. Calculating the total value of the logistics function. Many companies do not quantify the value of their logistics function due to time constraints, lack of experience in cost analysis, or organizational barriers. However, this step is essential in obtaining measurable results in line with a corporate strategy.
• Principle #3. Defining and measuring logistics indicators. Logistics scorecarding and measurement are key factors in a company's performance. Once the value of logistics function is defined, the company should adopt measurement and assessment methods to assist in obtaining its strategic goals.

According to the Logistics Field Audit™ methodology, the logistics auditors apply these three principles to help the clients unlock hidden logistics value, gain specific measurable results, and become leaders in the industry.