Logistics costs are the expenses incurred in moving a product, from sourcing the raw materials to delivering the finished product to consumers and all steps. Logistics typically include storage, packaging, procurement, labor, transportation, and administrative costs of transporting goods from one end to the other.
Reducing logistic costs is often a top priority for many businesses. You can moderate every area’s process through execution planning and control, reduce costs incurred and boost your profitability. Strategies for reducing logistical expenses can be diverse. They can range from having better shipping networks to optimizing inventory levels to providing better processes, improving supplier and third-party relationships, etcetera. Also, listening to and treating your customers well is a great way to reduce logistics costs and increase profits. This post outlines various ways to reduce your business’ logistic costs. Take a look!
- Check The Performance Of Your Equipment
Every business or company has numerous pieces of equipment primarily used in loading, handling, and storage, including pallets, forklifts, and conveyors. You need to analyze the performance of this equipment regularly to determine excess workloads and bottlenecks that may increase your processes’ costs. Furthermore, you can reduce logistic costs using preventive maintenance for your equipment to prevent expensive repairs and damage associated with poor maintenance. If your equipment is faulty, you can consider equipment for hire to facilitate your processes. In such a case, you may want to hire forklifts Melbourne or hire from near your place
- Analyze Your Delivery Routes
Have a program to analyze your delivery routes carefully by considering several factors, such as looking at how many deliveries are going to the same region. And analyzing your delivery routes will lower logistics costs by identifying less expensive ways, detecting errors, and avoiding unnecessary spending.
- Choose The Best Form Of Transport
To choose the right form of transport, you need to consider factors like the different modes available, the cost of each, the distance to be travelled, and the volume of goods to be transported, among others. To reduce logistic costs, you need to be flexible and adaptable to the different modes of transport. For instance, shipment by sea is much cheaper than air. However, the period taken could cost you sales.
On the other hand, rail transport could be cheaper than trucking, but a flexible combination of the two may be ideal for staying within budget and getting early deliveries. To reduce your logistic costs, reduce the use of more expensive transport options. For instance, if your customer needs some items that are in the cargo you’re shipping, instead of expediting the whole cargo, you can lower your costs by only expediting the customer’s items and using cheaper means for the remaining cargo.
- Consider Warehousing Services
If you’re transporting goods a long distance, it can be a good idea to hire a warehouse where you can store the goods closer to your customers to lower transportation costs. However, before keeping them in the warehouse, consider the security. Ensure that operations are safe to avoid expensive damage and injuries that can attract government fines.
If the warehouse has safety and security issues, the government can impose fines and shut down your operations. So have a safety manager who can oversee safety training and be accountable for any security or safety issue.
- Ship More and Less Often
The larger the shipment, the more the savings. For instance, shipping 15 containers at a time is cheaper than shipping three containers every week. Convince customers to place large orders; you can even try incentivizing these orders. Thus, shipping more goods allows better use of storage space through optimizing stacking and packaging.
- Use Digital Automation Technology
Using an automation technology system to manage warehouses or load and unload containers is a magnificent way to reduce logistic costs by reducing labor costs, saving the cost of production, and avoiding product damages. It helps optimize the efficiency of operations and cut down the overall cost linked with the production process.
Additionally, automating and digitizing specific logistic processes like shipment tracking, invoice reconciliation, and negotiating shipment rates using Transportation Management System (TMS) can help lower transportation costs further. These systems help you oversee your operations, thus boosting process efficiency. It also helps reduce the time and effort spent by your team on these processes, allowing them to focus on other tasks.
- Focus On Making Informed Decision
You can’t lower logistics costs without making an informed decision. You need actual data to identify where you’re incurring excess costs. It helps you find strategies to reduce these costs without interfering with production. For instance, a Transport Management System (TMS) or Warehouse Management System (WMS) can provide data that help lower excess expenditure, spot inefficiencies, and optimize your supply chain operations.
- Optimize Storage Systems
Storage is still an expensive aspect for many businesses. It’s essential to intelligently use your entire space rather than thinking about increasing the size. Identify and eliminate any visible space in your storage units. You can increase your storage density by making good use of your vertical space. Be creative with your store layout, adopt systems that will help manage your goods, and look for ways to reduce them, like encouraging customers to order more or using demand forecasts. Making good use of your storage also helps lower damage to shipping containers by minimizing movements during transportation. This way, you can significantly reduce your logistics costs.
- Improve Customer Satisfaction
Prioritize exceeding your customer’s expectations as it directly impacts the growth of the business and the ability to lower logistic costs. Maintaining the happiness of your customers helps improve business ties, paves the way for great negotiations, and most importantly, creates an excellent environment to implement strategies that help you reduce costs.
- Gain End-to-End Supply Chain Visibility
You can effectively lower logistics costs by overseeing the whole process of your supply chain. It means acquiring all the relevant information about what’s happening at all endpoints of your logistics network. By achieving full visibility of the supply chain, you can avoid disruptions, avoid unnecessary expenditure and gain valuable business insights.
The Bottom Line
There you have it! If you haven’t come up with strategies to lower your logistics costs, it’s time to consider improving efficiency and driving up your profits. Be sure to adapt the above tips to streamline your operations and keep pace with the technological advancements to use them to your advantage.
