Logistics Cost Management:

There are two basic methods to improving the cash flow of a business, increasing revenues and cutting costs. Keeping an organization running efficiently and profitably can be a challenge. Logistics management specifically can cost you money if you don’t keep it in check. When it comes to curtailing the cost of how you do business, addressing your logistics may provide healthy savings for the company through logistics cost management. Shipping products, materials, and equipment around the world in global logistics is complex and for larger companies must be run by someone who holds a recognized supply chain management degree. For better logistics cost management, companies large and small should follow 14 ways to reduce logistics costs and increase their efficiency.

reduce logistics cost

14 Ways To Reduce Logistics Costs:

Logistics management involves a lot more than just buying from warehouses and suppliers and moving goods from one place to another. It involves keeping track of inventory, expenses, costs per unit, return policies, supply chains, and vendors — and all these factors account for the total cost of your products as well as their price. Here are 14 ways that you can implement right now to reduce logistics costs and increase revenue with logistics management in your organization:

1: Use Air Freight Only for Emergency Shipments:

Air freight is very expensive and in most cases not needed if you set up a system that works with the customer or client to where you are shipping the items. If you plan to reduce logistics costs and work with your clients, air freight should only be used in emergencies when it has to arrive quickly. Otherwise, traditional methods should work well and you will save a considerable amount of money.

2: Better Planning for Global Logistics:

Planning your logistics starts with an overview of how you are currently running your shipping, where it can be improved, and how to reduce logistics costs. Logistics cost management starts with air freight, but you really need to look at your overall shipments and see where they can become more efficient. It helps if you can hire someone who has earned a good logistics qualification, like a diploma in logistics and supply chain management, as good expertise is developed in supply chain management, logistics management, green supply chain management, etc.

3: Use Full Container Loads to Improve International Logistics:

Another way to increase efficiency is to be sure that your goods are being shipped in full containers (FCL) rather than half or less of a container (LCL). In addition, going LCL means risking more damage to the goods as they can shift around inside when in transit. When you consider that going with less than a full container means you are paying more to ship your items, it helps to go FCL whenever possible.

4: Consolidating Goods:

If you do not have enough items to ship FCL, then you can ask to consolidate them with the items from other companies to reduce logistics. Reducing logistics costs will slow down the shipping time somewhat since the items will need to be packed and sorted separately, but it can save you a considerable amount of money. For customers who are willing to wait a little longer, consolidation is a good way to go.

5: Identify the Best Inland Transit Options:

This means locating transportation systems that provide the best combination of speed, efficiency, and price. The two most viable options are rail and full truckload service (FTL). Rail is highly efficient for larger volumes of goods to reduce logistics costs, while FTL is better if you are shipping a smaller number of items. You should avoid dedicated trucks as they might be faster, but they will cost more money.

logistics cost management

6. Establish Clear Objectives And Define Strategies

To understand the costs of your organization, you need to first understand the goals and objectives of your organization. What are you trying to achieve with your organization? What are your objectives? If you have an unclear understanding of these two concepts, you stand no chance of reducing logistics costs and increasing revenue in logistics management. Next, you need to understand the various strategies that can help you achieve your goals. One strategy might be to increase the number of online sales. Another strategy could be to increase the number of in-store sales. Ideally, you should identify the various strategies that can help you achieve your goals, as well as the various costs involved in each strategy.

7. Utilize Internal Resources:

External resources are expensive. Yes, you can spend a lot of money outsourcing certain tasks, but in many cases, internal resources are worth their weight in gold. Internal resources can include employees from a company, their computers, the existing software, trucks, and other equipment — internal costs can be lowered considerably by utilizing internal resources. Internal resources are worth their weight in gold. As an example, warehousing is an external cost. By utilizing internal resources, you can reduce the cost of warehousing and have the same effect — more revenue — by doing less. By utilizing internal resources, you can also reduce the cost of transportation, which would otherwise be outsourced if outsourced at all.

8. Find Streamlining Opportunities:

There are many opportunities to reduce logistics costs and increase revenue in logistics cost management. The first opportunity that you need to look out for is streamlining operations. Streamlining operations means reducing the number of operations that a company is involved in. For instance, if a company is involved in five different kinds of operations, it’s a good idea to reduce that number to three. By reducing the number of operations that your organization is involved in, you are automatically reducing the number of resources that are required. What this means is that you also automatically reduce the logistics costs of running your organization.

9. Don’t Over-Stocking:

While you want to stock up on inventory at certain times, you also don’t want to over-stock. As a general rule of thumb, don’t stock up on inventory that you have no intention of selling. If you receive a large number of orders for a particular item, you need to decide how much stock you need to hold for those orders. If you decide to hold a certain amount of stock for those orders, you need to decide when you plan to sell that stock. Ideally, you want to sell that stock as soon as possible to minimize the cost of holding that inventory. As a general rule of thumb, don’t hold inventory for more than 30 days.

10. Stay Upto Date on New Technologies:

New technologies are constantly emerging and changing the way businesses operate. New technologies have the ability to logistics cost management because they can reduce and automate many processes in a company. New technologies can be implemented to help companies save money. For instance, one tech implementation that can help in cost reduction and also increase revenue is robotics. Robotics can be used to automate manual processes and also help companies reduce costs by eliminating the need for a lot of staff members. New technologies can also be used to increase revenue. For instance, digital marketing is the latest tech to hit the market and can reduce logistics costs.

11. Estimate Return Rates:

For logistics cost management to be effective, you need to identify the return rates of your products. The return rates of a product reflect how much customers are satisfied with that particular product. If you don’t know how many customers are satisfied with a particular product — or if you don’t know how much profit that product makes for your company — then you stand no chance of reducing logistics costs. The return rates of a product need to be estimated and you need to know the background of those customers. If you don’t know how satisfied your customers are with a particular product, then you will have no idea how cost-effective that product is.

12. Track Everything:

While it is essential to estimate return rates, it is also essential to track everything. Tracking everything means that you need to keep track of every single aspect of your business — from sales to expenses to inventory. When you track everything, you are able to identify inefficient processes, identify areas for logistics cost saving, and also identify areas for revenue increase. Tracking everything ensures that you find areas for expense management for logistics, as well as areas for inefficiency.

13. Decide What’s Essential:

Logistics cost management can be achieved by making smart decisions. You need to know what is essential for your business, what is non-essential, and also what is merely nice to have. Deciding what’s essential for your business means deciding what is worth spending a little bit of money on (like marketing) and what is not worth spending money on (like salaries). Deciding what’s essential means that you know what is worth the money and what isn’t.

14. Negotiate with Vendors and Suppliers:

Logistics management is an expensive field. Therefore, it is essential to negotiate with vendors and suppliers. It is essential to negotiate with vendors and suppliers because they have the power to reduce logistics costs in your business. Negotiating with vendors and suppliers is essential because they have the power to reduce costs and increase revenue in your business. Negotiating with vendors and suppliers is essential because they have the power to logistics cost management in your business. Don’t be afraid to negotiate with vendors and suppliers. Negotiating with vendors and suppliers is a necessary part of business, and it is essential to do so.

CONCLUSION:

Logistics cost management can be achieved through the implementation of new technologies and streamlining operations. New technologies can reduce logistics costs and also can eliminate manual operations. Streamlining operations is also essential because this process should be automated. Establishing clear objectives and defining strategies, as well as utilizing internal resources, finding streamlining opportunities, not over-stocking, staying up to date on new technologies, and deciding what’s essential all contribute to reducing logistics costs. These are five tips that you can implement right now to reduce logistics costs and increase revenue with logistics management in your organization.

The greater efficiency you create when shipping items overseas, the more money your company will keep by reducing logistics costs. It pays to always keep an eye out for the most efficient shipping methods that meet your customer’s needs while saving you money. Implement these tips and you will see the impact that they have on your company. If you are interested in developing skills in International logistics, we recommend you study logistics courses and supply chain courses, which are offered by AIMS’ institute of supply chain management through an interactive learning system.