Supply chain and logistics expenses refer to all the costs associated with moving a product (or components of a product) from the source to the customer. When there’s pressure to be competitive, offer customers the best services, and provide memorable experiences, these costs can shoot through the roof. Let’s take a look at 3 logistical ways to save money and increase efficiency.
Transportation and shipping, warehousing, inventory storage and allocation, warehouse supplies and equipment, and staff labor are some of the most costly aspects of logistics.
Tips to Reduce your Logistics Costs
Reducing your logistics costs even by a small percentage can translate to significant savings in the long run. Fortunately, there are several quick steps you can take to help fix high supply chain costs.
1. Leverage business process automation
One transformation that guarantees a massive and instant impact on your logistics budget is business automation. Recent research shows that at least 72% of shippers currently use Enterprise Resource Planning (ERP) software, 56% use Warehouse Management Systems (WMSs), and about 38% use Transport Management Systems (TMSs). An increasing number also use supply chain visibility software.
You should be planning to hop on the bandwagon. However, if you’re just getting started with supply chain automation, we recommend starting with warehouse or inventory management systems. Warehouse/inventory management systems allow you to track your inventory, reorder products, and forecast demand, so you always have the right amount of product.
From there, you can adopt transport management systems for route planning and optimization and analytics solutions to uncover opportunities for improvement. Every time you automate, you increase productivity while reducing errors. The result is savings.
2. Consider supply chain collaboration
Collaboration is one word for the phrase, “You don’t have to do it alone.” That’s exactly how shippers should approach the supply chain. To reduce costs, you should always seek opportunities to collaborate with 3PLs, your network, and even competitors. You’ll share expenses; thus, everyone saves money and time.
Collaborating also reduces disruption costs. Disruption refers to any unexpected event that impedes the smooth flow of products in the supply chain. It may mean increased transportation expenses, rising gas costs, increased supplier expenses, or supply chain network disruptions occasioned by natural disasters such as floods and pandemics (e.g., the current Covid-19 pandemic).
Rather than face these issues alone, shippers should collaborate with partners to share ideas and resources. By leveraging each party’s expertise, experiences, and contacts, the team has a better chance of navigating even the trickiest situation. The best part is that costs are shared.
3. Manage actual costs through audits and contract negotiation
Finally, you can reduce logistics costs by managing the actual costs associated with supply chain activities. There are two approaches to consider here: invoice auditing and contract negotiation. You can implement both of these if you wish.
Invoice auditing refers to conducting parcel audits to uncover potential areas for saving. Back in the day, shippers would conduct the audits manually. But now you can use cloud-based auditing solutions for increased convenience and to reduce room for error.
Contract negotiation is another saving opportunity. However, you’re only going to succeed with contract negotiation if you ditch old habits and employ new approaches. One modern-day method that works well is outsourcing your contract negotiations to qualified third parties. Third-party firms have benchmarking data and the expertise to extract maximum value from any contract negotiation process. They also have one thing you may not have as an individual – group bargaining power.
Those are just a few logistical ways to save money and increase efficiency.
Ready to Outsource?
Are you considering professional 3rd party assistance in warehousing, logistics, transport, domestic or export crating, packaging, or shipping? Contact Days Distribution & Logistics at 886.847.8330 for a quote.