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Whether you’re adept at handling warehousing or want to get into shipping services, there are numerous ways to make money providing logistics services.
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An old friend from college has a growing ecommerce company selling athletic apparel they acquired as overstock from major retailers. The company could use some help keeping track of things such as incoming shipments, inventory, and customer orders—a series of processes collectively known as logistics. Your idea: Start a logistics company that could take this burden off your friend’s hands.
Here’s what you need to know about starting a logistics business.
Logistics is the handling, storing, and transporting of goods. Its origins are related to the military’s need to supply food, clothing, and equipment to soldiers on the move.
Modern logistics companies manage supply chains, the series of relationships between businesses that starts with a producer shipping goods and ends with those goods’ delivery to customers. Logistics is also involved in the transport of people; airlines, cruise ships, passenger trains, buses, and even taxis are thought of as logistics businesses.
As ecommerce and online shopping has grown, so has the need for companies to outsource logistics. For many businesses, it’s more cost-effective to pay someone else to manage activities like shipping and handling. Advanced information technology such as inventory tracking software and barcode scanning make this possible for ecommerce businesses of all sizes.
There are many business opportunities in the world of logistics. Here are some ideas for logistics companies to get you started:
Warehouse logistics is usually focused on temporary storage of bulk items. For example, a tire manufacturer may need a warehouse for thousands of tires before selling them to an automaker, but it doesn’t want to be in the business of running a warehouse.
There’s a significant upfront investment for running a warehouse—you need to own or lease a warehouse, and you will need an inventory tracking system, security, insurance, and maintenance. Success will depend on how well you manage the warehouse space and your ability to set competitive storage fees.
An order-fulfillment center is typically a large space for receiving, storing, and distributing goods. Unlike a warehouse, a fulfillment center focuses on quick turnover—typically small goods such as consumer items.
Fulfillment centers move goods quickly because the operators get paid for distribution rather than storage time. This is called order fulfillment, also known as pick-pack-ship logistics. This kind of logistics business also usually requires a significant capital investment to buy, lease, or build a facility to handle the volume of incoming goods from suppliers, as well as a computerized order-fulfillment system.
If you know how to write computer code and you have experience in ecommerce order fulfillment, you might create a software program that ecommerce businesses can use to manage the order-fulfillment process.
A logistics business could focus on real-time location tracking of packages for delivery to homes and offices. You could also track larger cargo destined for warehouses or other storage centers using GPS, barcodes, and other information technology.
As a freight forwarder, you serve as an intermediary between import and export shipping companies and businesses buying and selling goods. A freight forwarder arranges shipping—including customs clearance and storage—but has no direct or hands-on involvement in shipping.
Carrying cargo by truck is a type of transport and logistics business in which you haul goods from a producer, shipper, or warehouse to an intermediary or final customer. Long-haul trucking companies carry goods 250 miles or more, usually with an 18-wheeler. A short-haul trucking business typically handles routes of less than 250 miles, often relying on smaller trucks. Amazon, FedEx, and some other big package companies often use independent contractors for deliveries. You need your own truck or van if you want to work as a delivery driver.
Although still in its infancy, drone delivery might prove viable for handling light goods, such as small grocery packages, retail items, basic medical supplies, or small electronics. If you live in a city where customers would accept delivery by drone, this could eventually be a viable business model.
If you have a strong background in logistics, you might create a training program or course for companies looking to handle logistics in-house, or help companies that want to provide third-party logistics. You could sell the logistics training program as an online service, for example, or organize in-person training sessions at a location such as a hotel conference center.
Since the dawn of time, there’s been demand for taking people from Point A to Point B. Consider starting an airport shuttle service or get by driving for ride-share services such as Uber or Lyft. Consider cornering a niche transportation market—say, coordinating stretch Hummer limo rentals for bachelor parties.
You could start in the moving business with one truck and a few strong employees. You may not need any sophisticated logistics company technology, but you should have some experience handling the contents of homes and offices.
A vehicle rental business can be profitable, if logistically complicated. For a car rental business, you will need a fleet of vehicles and geographical coverage to ensure you have cars available when and where customers need them.
The following six steps can help get you started, no matter the kind of logistics business you’re considering:
Think about your existing skills and experience. If you’ve worked as a writer, consider starting a blog. Are you a computer whiz? Maybe develop software for logistics companies. Did you work in marketing and advertising? You could try focusing on developing specialized campaigns for logistics companies. Did you ever work as a truck driver? You might parlay that experience into starting a transportation and logistics business.
Draw up a business plan showing how you will operate your logistics business, how many employees you will need, and the size of your potential market. Include financial projections that scope out when you will break even and become profitable. Start with a simple plan and revise it later as the business evolves.
Almost every type of transportation and logistics business in the US has regulations at the federal and state level. Depending on the complexity of your business model, consider having legal counsel to guide you.
If your type of logistics business requires any kind of license or permit to operate, be sure to obtain it. If you have employees, you’ll need an employer identification number for payroll and tax withholdings.
Know the startup costs and obtain the funds necessary to start your logistics business. Make your business plan clear and easy to understand so you can persuade friends or family to back your venture, win funding from outside investors, or help a bank decide whether to lend you money.
If you already have experience in the field, contact people or companies you’ve worked with in the past and make your pitch for handling their logistics. You can also find customers through trade publications as well as industry gatherings and conventions. Consider using business-to-business (B2B) marketing and social media channels to get out the word about your logistics business.
A logistics business can be quite profitable, depending on your niche, your scale, and your ability to find customers. For example, profitable transportation business ideas require investment in large-capital assets, and they generally have lower profit margins than services such as freight forwarding and logistics software programs.
Demand for all types of logistics services is increasing, as more companies—especially those in the sphere of online shopping—look to outsource their logistics needs. Barriers to entry are fairly low in the logistics industry and a logistic business often is relatively easy to scale.
Common mistakes include:
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