Do you know how much your logistics costs are? Whatever your field of activity, and whatever the size of your company, it is likely that your logistics costs are (too) high. And that they reduce the profitability of your shipments while burdening your cash flow.
It is therefore natural to want to reduce them. But to do this, you need to identify the relevant levers that will enable you to make savings without compromising the quality of your deliveries – which would ultimately have negative consequences for your brand image. In short, you need to rationalize your logistics operations without losing sight of your customers’ expectations in terms of:
- quality of the goods,
- reactivity in the treatment of the orders,
- and speed of delivery.
What are these levers?
Reduce logistics costs by filling containers as full as possible
Many companies neglect this simple lever. It is about making sure that your packaging and containers are filled to their maximum capacity. This is an excellent way to reduce your logistics costs. And, at the same time, you can significantly reduce your greenhouse gas emissions by rationalizing the number of trips required to transport goods.
As such, there are two things you can do:
- Optimize packaging by using all available space in envelopes, packages, cartons or pallets, and make sure you don’t send half-empty packages.
- Fill the containers of the chosen modes of transport (truck trailers, train cars, airplane holds, ship holds) as fully as possible.
To effectively reduce your logistics costs in this way, it is recommended to set up a transport plan listing the flows and types of traffic, so that you can focus on the most economical ones.
Change your transport providers to rationalize your costs
The tariffs charged by your transport providers have a direct influence on your logistics costs. In order to reduce these costs, it is essential to ask yourself at regular intervals whether these service providers are (still) meeting your needs:
- Is the geographical location of the warehouses optimal?
- Are the modes of transport used relevant to the nature of your goods?
- Are the delivery deadlines always respected?
- Are the products handled with care and delivered in their original condition?
- Is the proposed packaging adequate?
If you answer no to one or more of these questions, you have a lead (or leads) to reduce logistics costs.
If necessary, don’t hesitate to change carriers. But be careful: your choice should not be based solely on rates! Rationalizing your transport means finding the right balance between the quality of the service and its cost. You must therefore make sure to:
- Analyze the reputation of the provider and its level of transparency. For example: any problem encountered during pick-up must be communicated to you;
- Study its quality of service in a perceived area. It may be excellent in a given area, but not in others;
- Negotiate the different aspects of its pricing structure (e.g., apply a percentage discount above a certain delivery volume), without risking a negative impact on the quality of the transport.
Test a new carrier for one or two months to judge its quality and reliability.
Reduce the weight of your shipments to reduce delivery costs
Carriers’ rates increase year after year, which affects your overall budget. To reduce your logistics costs, it may therefore be worthwhile to try to reduce the total weight of your shipments in order to move to the lower price bracket and improve your margins. Because, at the national level, in most cases, it is the weight of the parcels that is taken into account for invoicing.
How to reduce this weight?
- By reducing the weight of the cardboard (double rather than triple fluting for certain shipments in a secure transport framework; cushioning with paper or air cushioning rather than with wood chiseling or Flow Pack; no cushioning at all thanks to certain adapted packaging; etc.).
- Trading cardboard for bubble wrap (depending on the nature of the product).
Internationally, the volume weight is used as the basis for calculating transport. In order to reduce logistics costs, it is necessary to optimize the volume of the rounds:
- define median sizes to encompass slices of orders,
- assigning weights to orders according to the frequency of shipment,
- opt for customized packaging,
In any case, do some tests before deciding on your shipping method!
Optimize logistics with new technologies
Finally, the last logistics cost reduction lever to consider is the optimization of the supply chain through the use of new technologies. Indeed, software, interfaces, algorithms and data allow you to make significant savings by helping you to manage your logistics more efficiently.
TMS (Transport Management Systems), in particular, are valuable virtual assistants at all stages of order delivery. They can be used to organize shipments, manage supplies, operate forwarding operations, and even calculate the CO2 emissions generated by the supply chain.
They are tools for infrastructure analysis, operational monitoring of routes, comparison of carriers’ rates, decision support, cost calculation, and optimization of transport schemes (to adapt them to your company). They are therefore very complete and quickly become indispensable once you have implemented them.
With their help, you can generate precise reports concerning your global operations or specific stages of the supply chain, and thus identify the points to be corrected to reduce your logistics costs.
In conclusion, you can activate one or more of these levers to reduce logistics costs. But the best way to rationalize these costs is still to entrust this task to a dedicated tool such as a TMS!