How To Reduce Logistics Cost

Logistics costs are no joke. A few altered variables and your logistics costs can drown your budget. Cost control and reduction should be a priority for logistics managers.

The more efficient and managed logistics are, the less likely you will encounter circumstances that dramatically increase total costs. 

Reducing logistics costs involves many strategies. It takes a keen eye, a smart manager, and, in part, luck to avoid the most severe hits. Here are simple strategies to maximize your transportation logistics supply chain.

Establish Expectations

Don’t set unrealistic expectations for shipping and delivery. Be honest with the customer.

Give them an accurate shipping date and cost that will not cost you or them more than what they agreed to. This minimizes the risk of increased costs, errors, and disappointments.

Listen To Your Customer

First and foremost, listen to your customers. They may have suggestions or complaints to point you in the right direction regarding reducing costs and improving logistics.

Profit follows any company that prioritizes customers and allows them to contribute.

Hire A Third Party Logistics Company

Hire A Third-Party Logistics Company

third party logistics provider handles all logistics decision-making for you. They manage everything and optimize your logistics to best serve you and your customers.

If you don’t have the time or want to expand your company, do what thousands of other businesses have done and contact a third-party logistics company to get a quote.

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Use Logistics Analytics

Logistics analytics can tell you much about your logistics, i.e., strengths and weaknesses, shipping times, rate variances, etc.

Using RFID tags, location tagging, and more, automatically generated data can help identify where a product is and if its movement meets expectations.

Streamline Inventory Levels

Reduce your inventory. Analyze demand patterns, plan production accordingly, and implement lean manufacturing.

This way, you can improve cash flow while minimizing inventory space. Furthermore, you can also be ready for busy periods by increasing production at the right time.

Smarten Up Your Shipping Network

Take a close look at your shipping network. There may be ways to trim costs by altering how you ship, who you work with, and when you ship.

There may be ways to defer certain costs to the customer if they prefer faster shipping. There are many ways to improve shipping efficiencies and positively impact your logistics bottom line.

Improve Existing Processes

Look at your logistics processes and ensure clear communication or collaboration between departments, vendors, and stakeholders.

Identify where there are delays or increased costs and try to negotiate a better way to do your logistics.

This is without having to overhaul the entire way you’re doing business. Reorganize logistics processes wherever possible if it increases efficiencies.

Consider Switching Suppliers

Some costs are out of your control, such as fuel and machinery replacement costs.

However, switching to a different supplier may save you money, especially if you’re operating internationally. Be open to alternative suppliers if expenses rise without justification.

Look At Different Modes Of Transportation

If you operate internationally, be flexible with your transportation type. Shipping by sea is typically cheaper than by air, for example.

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Rail transportation is cheaper than trucking. Transport costs vary according to mode. Check out what works best for your company.

Look At Different Modes Of Transportation

Negotiate Better Shipping Rates

Discuss how to bundle products together or use volume to negotiate a better shipping rate for your company.

Consult suppliers or other stakeholders for ways to improve shipping and their assistance in negotiating rates.

Consider Where Your Warehouses Are Located

If you move warehouses, you may find storing products closer to customers is more advantageous. It can reduce transportation costs in many situations.

There are security considerations, safety and training, and one must weigh the pros and cons of stakeholder partnerships.

Tap into Automated Logistics Services

In logistic warehouses, automation can be fundamental in reducing labour costs, minimizing damages, helping with production, and more. If this option is available to you, consider automation’s cost savings.

Keep Up With Preventative Maintenance

Cut costs on equipment by avoiding equipment failure and following through with preventative maintenance. Emergency breakdowns don’t work.

Poorly maintained equipment is also a safety hazard. Ensure all equipment is properly maintained and working during business hours.

Address Logistics Problems Quickly

If you notice clear logistical problems increasing costs, do not wait to address them. Commit to cost reductions wherever possible.

This is where software analytics can come into play. However, the software is only as good as those witnessing the results.

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Ella Marcotte

Jonathon Spire

Jonathon Spire

Tech Blogger at Jonathon Spire

My diverse background started with my computer science degree, and later progressed to building laptops and accessories. And now, for the last 7 years, I have been a social media marketing specialist and business growth consultant.

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Jonathon Spire

I blog about a range of tech topics.

For the last 7 years I have been a social media marketing specialist and business growth consultant, so I write about those the most.

Full transparency: I do review a lot of services and I try to do it as objectively as possible; I give honest feedback and only promote services I believe truly work (for which I may or may not receive a commission) – if you are a service owner and you think I have made a mistake then please let me know in the comments section.

– Jon