An old friend from college runs a growing e-commerce company that sells sports apparel acquired as excess inventory from major retailers. The company could use some help in tracking incoming packages, inventory, customer orders, and a series of processes collectively known as logistics. Your idea: Start a logistics company that takes this burden off your friends' hands.
Here's what you need to know to start a logistics business.
What is logistics business?
Logistics refers to the handling, storage, and transportation of products. Its origins are related to the military's need to provide food, clothing, and equipment to soldiers on the move.
Modern logistics companies manage supply chains, which are a series of relationships between companies that begin with producers shipping goods and end with those goods being delivered to customers. Logistics also involves the transportation of people. Airlines, cruise ships, passenger trains, buses, and even taxis are considered logistics businesses.
As e-commerce and online shopping grow, so does the need for businesses to outsource logistics. For many companies, it is more cost-effective to pay someone else to manage activities such as shipping and handling. Advanced information technologies such as inventory tracking software and barcode scanning make this possible for e-commerce businesses of all sizes.
logistics business ideas
There are many business opportunities in the world of logistics. Here are some ideas for logistics companies to get started.
Warehousing
Warehousing logistics typically focuses on temporary storage of bulk items. For example, a tire manufacturer may need a warehouse to store thousands of tires before selling tires to car manufacturers, but they don't want to be in the business of running a warehouse.
Operating a warehouse requires a large upfront investment. You will need to own or lease a warehouse, as well as inventory tracking systems, security, insurance, and maintenance. Success depends on how well you manage your warehouse space and set competitive storage rates.
Fulfillment or distribution center
An order fulfillment center is typically a large space where products are received, stored, and shipped. Unlike warehouses, fulfillment centers focus on the quick turnover of small items, such as consumer goods.
Fulfillment centers move goods quickly because operators are compensated for delivery rather than storage time. This is called order fulfillment, also known as pick-pack-ship logistics. This type of logistics business typically requires significant capital investment to purchase, lease, or construct facilities and computerized order processing systems to process large volumes of incoming goods from suppliers.
order processing software
If you know how to write computer code and have experience with e-commerce order processing, you may be able to write a software program that e-commerce companies can use to manage their order processing processes.
Cargo and parcel tracking
Logistics businesses can focus on real-time location tracking of packages delivered to homes and offices. We can also use GPS, barcodes, and other information technology to track large shipments destined for warehouses and other storage centers.
cargo transportation
Freight forwarders act as intermediaries between import/export shipping companies and companies that buy and sell goods. Freight forwarders arrange for delivery, including customs clearance and storage, but are not directly or physically involved in the delivery.
truck transportation
Freight transportation by truck is a type of transportation and logistics business that moves goods from producers, shippers, and warehouses to intermediate or final customers. Long-haul trucking companies typically use 18-wheelers to transport goods over distances of 250 miles or more. Short-haul trucking businesses typically handle routes less than 250 miles and often rely on light trucks. Amazon, FedEx, and other large package companies often use independent contractors for deliveries. If you want to work as a delivery driver, you'll need your own truck or van.
drone delivery
Although drone delivery is still in its infancy, it could prove practical for handling lightweight items such as small grocery packages, retail goods, basic medical supplies, and small electronics. If your customers live in a city that accepts drone deliveries, this could eventually become a viable business model.
Logistics training
If you have a strong background in logistics, you could create training programs and courses for companies that want to handle their logistics in-house, or help companies that want to provide third-party logistics. can. For example, you can sell your logistics training program as an online service or organize in-person training sessions at a location such as a hotel conference center.
Taxi or shuttle service
Since time immemorial, there has been a need to move people from point A to point B. Consider starting an airport shuttle service or using a rideshare service like Uber or Lyft to get around by car. Consider developing a niche transportation market. For example, we can coordinate the rental of a stretch Hummer limousine for your bachelor party.
moving company
All you need is one truck and a few talented employees to start a moving business. You don't need the advanced technology of a logistics company, but you do need experience working with household and office items.
rental car
A vehicle rental business can be profitable even if the logistics are complex. Car rental businesses require fleet size and geographic coverage to ensure that customers have access to cars when and where they need them.
Tips for running a logistics business
- know your strengths
- Create a business plan
- Understand the regulations
- Obtain permits and licenses
- Line up financing
- develop customers
No matter what type of logistics business you're considering, these six steps will help you get started.
1. Know your strengths
Think about your existing skills and experience. If you've worked as a writer, consider starting a blog. Are you a computer whiz? Maybe you develop software for a logistics company. Have you worked in marketing or advertising? You might want to focus on developing campaigns specifically for logistics companies. Have you ever worked as a truck driver? You may be able to use that experience to launch a transportation/logistics business.
2. Create a business plan
Create a business plan that shows how you will run your logistics business, the number of employees you will need, and the size of your potential market. Include financial projections for when you will break even and start making a profit. Start with a simple plan and modify it later as your business evolves.
3. Understand the regulations
Almost every type of transportation and logistics business in the United States has regulations at the federal and state level. Depending on the complexity of your business model, consider hiring legal counsel for guidance.
4. Obtaining permits and licenses
If your logistics business requires any licenses or permits to operate, be sure to obtain them. If you have employees, you will need an employer identification number for payroll and tax withholding purposes.
5. Funding lineup
Learn about startup costs and raise the funds you need to start your logistics business. Make your business plan clear and easy to understand to convince friends and family to back your venture, get funding from outside investors, and help banks decide whether to lend. I want to be able to do that.
6. Customer development
If you already have experience in this field, reach out to people and companies you've worked with in the past and pitch them about handling logistics. You can also find customers through industry publications and industry meetings and conventions. Consider using business-to-business (B2B) marketing and social media channels to spread the word about your logistics business.
Logistics Business Idea FAQ
Is it profitable to own a logistics company?
Logistics business can be very profitable depending on the field, size and ability to find customers. For example, profitable transportation business ideas require large asset investments and typically have lower profit margins than services such as freight forwarding or logistics software programs.
Why do you need to start a logistics business?
As more companies, especially those in the online shopping space, consider outsourcing their logistics needs, demand for all types of logistics services is increasing. Barriers to entry in the logistics industry are fairly low, and logistics businesses are often relatively easy to scale.
What are the common mistakes to avoid when starting a logistics business?
Common mistakes include:
- Underestimating initial costs
- Overstaffing or understaffing
- Too much or too little storage space
- Lack of clear and precise procedures
- Insufficient IT to process and track inventory
- Operating without customer contracts or liability waivers
- inadequate insurance
