Logistics for small businesses

For many people, the answer is a business with a large structure, a vast portfolio and a high flow of goods in and out.

 

Indeed, large companies need well-structured logistics and storage solutions to support their entire operations. But they are not the only ones: logistics for small companies is also essential, as it allows the business to develop through good institutional organization practices. 

 

However, despite its importance, logistics is often overlooked in small businesses. This is due to the high cost of transportation, storage and distribution. Unfortunately, this is a national trend — Brazil allocates less than 0.5% of its Gross Domestic Product (GDP) to logistics. In comparison with other developing countries, we have Russia, which allocates 7%; India, 8%; and China, 10.6%.

 

The question then arises: how can we use the logistics strategy in small Brazilian companies? 

 

First of all, it is necessary to understand what constitutes a small business and what differentiates it from a micro-enterprise. In 2006, the General Law of Micro and Small Businesses was established, which provides for differentiated and favorable treatment for micro-enterprises and small businesses. 

 

Despite having undergone changes over the years, the objective of this law is to contribute to the development and competitiveness of Brazilian micro and small businesses. The Brazilian Micro and Small Business Support Service (Sebrae) understands that this is an effective way to generate employment and promote income distribution, social inclusion, reduce informality and strengthen the economy.

 

According to Sebrae, the main differentiation criterion is gross revenue:

 

● Microenterprise: its definition encompasses business corporations, simple partnerships, limited liability companies, and entrepreneurs, duly registered with the competent authorities, earning up to R$ 360 thousand in gross annual revenue.

 

● Small business: its definition encompasses those that will not lose their classification as long as they obtain additional revenue or exports, up to the limit of R$ 480 thousand. 

 

We understand logistics as the integrated operation to manage the supply chain and distribution of products in a rationalized manner. This concept arose from the need to reduce costs and increase business competitiveness, in addition to meeting customer needs. 

 

In other words: logistics is the execution of the control of all activities linked to the acquisition of materials for the formation of stocks, from the moment of their conception until their final consumption.

 

With this definition in mind, it is easy to understand the importance of logistics within small and medium-sized enterprises (SMEs). The set of tasks, which range from receiving the product to its packaging, ensures customer satisfaction, seen as the main source of revenue. Without this, there is little chance of the business thriving in the long term. 

 

With the concepts learned in the previous topic, managers need to view the logistics process as a large chain of actions that aims to enhance the company's results. Therefore, failures in the processes end up resulting in major losses for the company. 

 

Find out what some of the main logistics challenges are for small businesses and how to overcome them.

According to the World Economic Forum, Brazilian road quality has an average of 2.8. This number is below the global index, which reaches 3.9. Therefore, transportation is one of the main logistics challenges because deteriorated roads make operations difficult and increase the cost of traffic. 

 

After all, companies need to invest much more in their fleet to ensure that products suffer minimal damage during transit. And even then, there is still a risk of damage, which ends up generating more losses. 

 

One way to overcome this challenge is to maintain distribution centers in strategic locations. In other words, close to the country's main highways or product sales centers. This reduces transportation costs and minimizes the chances of product loss or damage.  

 

We always emphasize the importance of viewing suppliers as strategic partners for your business. This statement is even more important for small businesses, which need to maximize their business potential in search of a competitive edge. 

 

Before closing a deal, do some detailed research on the main competitors in the market. Your choice should be based on the best cost-benefit ratio and we recommend that you opt for those who offer customized solutions, that is, who consider your company's needs and create projects that meet these requirements.

 

Another point that requires strategic analysis from small business managers is storage. From choosing the type of structure that will best suit your business operations to organizing your products, you must take into account the turnover capacity of that item and how long it can be stored. An incorrect assessment can lead to serious problems in the day-to-day operations, such as: incorrect storage of perishable products increases the risk of their expiration date expiring. Therefore, it is ideal to have effective management of storage systems. Hire solutions that facilitate product storage and maintain a balance between meeting customer demands and minimizing the number of non-moving goods.

 

Finally, one of the challenges of logistics for small businesses is managing the entire flow of information and processes. The person responsible for this needs to always be aware of market trends, looking for new ways to integrate human labor with automation to maximize results. 

 

Large companies often use specific software for this purpose, but SMEs do not always have budgets that include these programs. In these cases, using spreadsheets in Excel or Google Sheets can be beneficial if the person knows how to use them to their advantage.