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Things to Consider Before Starting a Logistics Business in Nigeria

Logistics involves planning, controlling, and managing the process of moving and storing goods from a point of origin to the final destination. Most logistics companies essentially manage the chain of supply of goods from where it is produced to where it is finally consumed. It includes services such as warehousing, transportation, inventory management, packaging, material handling, security, etc.

Starting a logistics business requires specialized knowledge and rigorous research. It is one of the most volatile businesses and involves a lot of technicalities.

First, let’s talk about Startup considerations:

  • Get your finances right - Logistics business is capital intensive. It typically requires huge capital investment, depending on the aspect of the industry you want to venture into. Therefore, an entrepreneur must ensure thorough due diligence is done to accurately estimate the total cost of the business.

  • Write a business plan - A business plan shows the structure of the business end-to-end. It is critical to getting investors because it indicates seriousness to start. Due to the nature of a logistics business, it is important to do a feasibility study, conduct a thorough risk assessment and mitigation exercise and develop a strategy for sales and marketing. These are the most critical aspects of most business plans.

  • Obtain the proper licenses - Apart from the obvious business registration with the Corporate Affairs Commission (CAC), an entrepreneur must find out the required licenses, permits, and authorizations to have before and even during the course of operating a logistics company.

  • Choose a strategic location - The location of your company must be close to where the bulk of activities in the industry happen. Thus, it makes business sense to set up your office or warehouse close to production factories, shipping hubs, airports/seaports.

  • Identify your competition - Although it goes without saying and this should definitely be part of your research, identifying your competition is very important. This is because the logistics industry is quite broad, so an entrepreneur has to drill down to his/her niche within the industry, and know exactly the players there and what services they provide to develop a competitive advantage/unique value proposition that will make his company stand out.

  • Insurance - This goes hand in hand with getting your finances right. Insurance planning is critical to the logistics industry because it is a high-risk business. Customers want to know that their products are taken care of in case of a loss when dealing with logistics companies. Obtaining insurance also gives the business protection from bankruptcy and signifies a legitimate business.

Some key Operational considerations:

  1. Partnerships — Connecting with the right partners is crucial to succeeding in the logistics industry. It is important to make the right connections, as you do not want to obtain investments and acquire all these capital equipment/instruments without an active Local Purchase Order (LPO).

  2. Crafting a Digital/Online Strategy — With the increasing adoption of technology and online presence, it has become imperative for most businesses, irrespective of the industry, to have a digital strategy. This is one of the areas a new entrant can differentiate his business in the market and grow his customer base. One strategy could be creating a platform where people can quickly compare rates, schedule, and track their shipments.

  3. Developing Competitive Advantage — Some features can act as a source of competitive advantage for an entrepreneur entering into the logistics industry. These include: combine shipments option going to same locations to reduce the cost of shipping, flexible payment options either by weight, by distance, — enable rewards.. accumulate miles and use it for next shipment as a discount.

Want to learn more? Get in touch and we can discuss in-depth.

Business Process Technologies, Nigeria is positioned to help organizations seamlessly commercialize products in Nigeria.