Logistics as a differentiator for when the economy grows again

In the area of ​​operations, consulting support for companies is an activity that, in a somewhat simplistic way, can be seen as existing regardless of the economic cycle. In times of growth, projects aimed at supporting the growth of operations, logistical investments, initiatives to guarantee differential service levels and gain market share predominate. On the other hand, in times of downturn, efforts are focused on initiatives to reduce logistical costs and productivity gains.

However, the political and economic crisis that has hit the country is so profound and unpredictable that it has resulted in a retraction and freeze of various logistics initiatives at companies. The worsening of the recession in 2015 was so acute, and the consequent impact on the loss of sales volume in companies so significant, that the year was marked by internal restructuring initiatives and efforts to reduce costs through “brute force”, without necessarily a concern to redesign processes and operations in a more efficient and sustainable way. The orientation was pure and simple cost cutting, ensuring business continuity in the short term.

With the prospect of changes in the country's economic orientation, we at the ILOS have observed in recent weeks that this scenario has begun to change. We've seen a considerable increase in the number of initiatives currently being discussed with our customers and partners compared to late last year and early this year. These initiatives are, of course, strongly focused on cost reduction, but with a greater vision of productivity gains and more efficient operations.

As an example, we have inventory management initiatives that, despite the strong orientation of seeking to reduce tied up capital, are concerned that smarter management ensures better balancing of inventories and does not jeopardize the availability of products for sale. Or even initiatives to reduce transport costs that, instead of purely and simply seeking a renegotiation of freight tables, aim at efficiency gains through better use of vehicles and more efficient routings.

However, what positively draws our attention is that there is a range of companies, large and medium-sized, that did their homework well throughout 2015 and, despite the drop in revenue and profitability, were able to stabilize operations and are achieving navigate more safely now in 2016. These companies, in addition to cost reduction initiatives, are also discussing ways of structuring logistics to enable growth when it comes. Distribution strategy, operations in new markets and even investments in logistics are gradually returning to the table.

If we have reached the bottom of the economic crisis, it is up to economists to respond. But the fact is that some companies are already starting to review their logistics strategies and redesign their operational processes so that they become competitive differentials and leverage sales and market gains in the not so distant future.