Mastering Logistics Due Diligence: Unlocking Efficiency and Value Creation

Logistics Due Diligence is a comprehensive evaluation of a company's logistics and supply chain operations. It is typically conducted during mergers and acquisitions, investments, strategic partnerships, or operational audits. The goal is to assess the strengths, risks, and improvement opportunities within the logistics function. 

Here’s a structured breakdown of what logistics due diligence involves:

Scope of Logistics Due Diligence

Due diligence in logistics covers the entire supply chain ecosystem, including: 

• Inbound logistics (supplier to warehouse/factory) 
• Outbound logistics (distribution to customers)
• Inventory management
• Warehousing and fullfillment
• Transportation (fleet, third-party logistics providers)
• Technology systems (WMS, TMS, ERP)
• Compliance and risk management

Key Areas of Evaluation 

• Operational Performance

  • Efficiency of transportation and warehousing operations.

  • Key metrics (e.g., OTIF - On Time In Full, order accuracy, delivery lead times).

  • Route optimization and load planning.

  • Network design and logistics footprint.

• Cost Structure

  • Logistics cost as a % of revenue.

  • Freight costs, warehousing costs, fuel, labor, etc. 

  • Benchmarking against industry standards.

• Contractual Obligations

  • Agreements with 3PLs, carriers, warehouse providers.

  • Lease agreements for distribution centers.

  • SLA performance and penalties.

• Technology Infrastructure

  • Warehouse Management Systems (WMS). 

  • Transport Management Systems (TMS). 

  • Integration with ERP or order platforms. 

  • Use of automation or robotics. 

• Inventory Management

  • Inventory turnover ratios.

  • Obsolescence and shrinkage. 

  • Safety stock policies and forecasting practices. 

• Compliance & Risk
  • Regulatory compliance (customs, hazardous materials, DOT, etc.). 
  • Insurance coverage.
  • Business continuity plans and supply chain resilience.

Deliverables and Outcomes

A logistics due diligence report typically includes: 

• Executive summary with key findings. 

• SWOT analysis of logistics operations. 

• Cost-saving opportunities and efficiency gains. 

• Risk matrix highlighting potential red flags. 

• Recommendations for integration or improvement. 

 Tools & Methodologies 

• Site visits and process walkthroughs. 

• Interviews with supply chain and ops personnel. 

• Data analysis (logistics KPIs, cost breakdowns). 

• Benchmarking against industry best practices. 

• Contract and system audits. 

When Is It Needed? 

• Pre-acquisition assessment. 

• Divestiture or carve-out planning. 

• Strategic partnerships or joint ventures. 

• Internal audits and performance turnarounds. 

• Entry into new markets with complex logistics needs. 

Redwood: Experienced Logistics Due Diligence You Can Rely On 

Redwood has over 20 years of experience delivering logistics solutions and we recognize the challenges our PE and consultancy partners face in performing logistics due diligence and accelerating supply chain value across their portfolio companies or clients. We offer complimentary supply chain and logistics analysis to our partners and we recently developed the Logistics Health Check, a simple checklist designed to identify portcos or clients that could achieve significant savings on transportation spend through logistics optimization. Click the link below to download the checklist or learn more about our Private Equity or Consultancy partnerships. If you’re interested in learning more about why PE firms use external partners for logistics due diligence, click here.