Logistics must be effective and efficient

- A good logistics program will ensure that you're doing the right things to meet your business goals, that you're adding value to your business strategy and creating customers who want to do business with you. That's being effective. As materials and products move throughout the supply chain, it's also important to manage, control and reduce your costs wherever possible. That's being efficient. Let's look at Amazon for a pretty good example of being effective and efficient. When I order something from Amazon, the package has traditionally been delivered to my home by UPS. Amazon outsourced the delivery function to UPS for two pretty good reasons. UPS is an expert at delivering packages and that gives Amazon peace of mind that my package will be delivered properly. And their customer will be satisfied. Outsourcing to UPS shows how Amazon has been effective. And they have also been efficient because they don't have to bear the cost of owning and operating a fleet of trucks and airplanes and a network of transportation hubs. Additionally, UPS most likely gives Amazon a discounted price based on the high volume of their business, which further lowers their costs. But at a certain point, Amazon began to deliver their own packages. Are they no longer effective and efficient in their deliveries? Actually, they're becoming even more effective and efficient. Amazon is already very good at filling, sorting and distributing orders and over the years, they have learned a lot about on-time deliveries. They think they can do it better. By taking control of deliveries, they will have the flexibility to respond to changes quickly. They can more easily coordinate delivery activities with their fulfillment centers, hubs and pickup locations. In short, their entire logistics networks becomes more effective but what about efficiency? In some cases, Amazon provides loans to individuals who buy a truck and deliver exclusively for them. That keeps capital costs down for Amazon and if there's a surge in demand, they can use UPS to deliver the overflow. It's a pretty smart move that eventually could create a delivery system that competes directly with UPS and FedEx by picking up and delivering all your packages, which will drive Amazon's cost even lower and continue to grow their business. Clearly, being efficient and effective can also drive success for your logistics network, your supply chain and your company.