Logistics can spell the difference between success and failure in business. For example, a few years ago a young engineer-entrepreneur began to build a company from scratch. His first product was liquid bleach. Actually, he didn’t know much about the business at the time. He knew that liquid bleach is nearly all water and that the U.S. market is divided among two large manufacturers, Clorox and Purex, and a number of smaller producers that sell branded and private-label bleach on a regional basis. He also knew that the market for private-label bleach in New England, where he wanted to be, was dominated by a manufacturer located in New Jersey.
So the entrepreneur decided to found a private-label bleach manufacturing company near Boston. This location provided his company with a distinct transport cost advantage over its chief competitor. But he didn’t stop there. He located his plant near a concentration of grocery chain retail outlets. This enabled him to sell his bleach under an arrangement in which retailers’ trucks were loaded with his bleach after making their retail deliveries and before returning to their respective distribution centers. Given this double cost advantage, he was able to go one step further. By adding other items to his product line, he was able to obtain efficient truckload orders from his retail chain customers.