Reducing Supply Chain Transportation Logistics Costs
Transportation costs can be a significant part of a company’s overall logistics spending. With increases in the price of fuel, the proportion allocated to transportation can be upward of 50 percent. This cost is passed on to the customer and the price of goods continues to rise. Consider a number of transportation strategies that can be used by management to help reduce costs.
In the same way that the purchasing department streamlines vendors to gain better prices with higher volume, the transportation manager should adopt the same strategy when it comes to the number of carriers used.
A transport manager spends time finding the best carrier at the best price, but sometimes that leads to a large number of carriers being used, albeit giving excellent service. The multiple carrier approach occurs when the transport manager has negotiated the best deal for each route but has not looked at the big picture.
By reducing the number of carriers, the amount of work offered to the remaining carriers will increase. By offering vendors a larger volume of work, the carrier should be able to offer lower rates across all routes. It may be the case that on some routes the rate is not as good as was negotiated with another carrier, but overall the rates across all routes should be lower.
Explore Shipping Consolidation Opportunities
The Less-than-truckload (LTL) shipment is an economical option for smaller weights. And if you can try to consolidate large shipments of different products or shipments for all buyers into one shipment, you would save cash using full load shipping (FTL).
Consider warehousing services
If you are shipping a lot of goods from point A to point B, especially over a long distance, you can store products closer to your customers and thus drastically reduce transport costs. You must first and foremost understand the security considerations. Make sure that the operation of your warehouse is safe – Be securely proactive. Do everything to avoid expensive injuries. Try as much as possible to avoid government fines. If you have several security problems, the government can close down your operation. Get a safety manager who would be accountable for safety and organize ongoing safety training.
Using a single, integrated platform
Supply chain operations should always be integrated into a single platform, accessible to all involved parties. This way, you’re avoiding duplication of activities across operations. Such duplicated efforts are time consuming, impair your efficiency, and leave room for error.
Over 2/3 of businesses choose to outsource at least a portion of their supply chain operations, mostly transportation and storage. The reasons behind outsourcing mostly include cost reduction, increased efficiency, and the convenience of entrusting important aspects of your work to more efficient and skilled professionals.
To avoid misunderstandings and excessive costs, it’s in the best interest of both the client and the logistics provider to agree on the most important issues. This includes the frequency and size of shipments, specifics regarding packaging, product handling, temperature control requirements, etc.
Supply chain visibility
Maintaining visibility of your supply chain can improve planning and expense control through better management of your safety stock. Namely, to reduce the risk of product deficits, supply chain managers maintain a certain level of extra stock. It is a way to counteract uncertainties in the supply & demand process, and maintain proper service levels.
Although there is no way to predict or prevent disruptions in the logistics process, proper supply chain visibility can give managers an insight into such issues. Using real-time dashboards that refresh data automatically provides supply chain managers and financial executives with the most current and relevant information.
This way, they can react quickly and find alternate routes of supply or distribution if the need arises. This also reduces the need for large safety stocks and contributes to better cost control.
Focus on Labor Costs
Analyze labor reduction for any warehousing operation. Every project should focus on labor costs. There are Labor Management Software systems that can help manage work in the warehouse. Incentive programs for warehousing employees do work. So do projects that automate repetitive, structured tasks, like light or voice-directed picking, carousel storage, robotics, etc. Try warehouse mobility in your four walls. You will reduce overhead costs. It will increase individual productivity; you need fewer staff members and less equipment.
Focus on Preventative Maintenance
To save money on any equipment, implement Preventative Maintenance as a way to achieve logistics cost reduction. Reactive fixes/maintenance do not work. In the middle of a job, you have an equipment breakdown. This can be costly in man hours, customer service (goods needed cannot be processed), accidents (safety): unloading a container and the forklift dies: the pallet slips off the forklift tines which can injure employees.
Tip on how companies can cut logistics costs is…
There are several things that come to mind when thinking about how companies can save money on logistics costs. As a third party logistics provider, we hear a variety of reasons why prospects do not wish utilize real solutions to help save them money. But by far, the one response that actually cost companies money on a daily basis is we’ve always done it that way or we already have excellent pricing in place. In some cases, yes, their current operations and agreements are great deals but in many cases these statements are ill-informed and rehearsed. Yes, the market has a magnitude of companies that assist in logistics needs but what some do not realize is that there are more true savings than on the actual freight being moved or stored. Being able to implement more stream-line processes or reporting that saves your transportation and accounting teams time has been proven to save money. If on a monthly basis, while implementing these processes, companies might be able to save their teams time on operational duties, allowing them to spend more quality time handling other duties. That is just one example of how streamline processes save on overall costs rather than just freight or storing costs.”