7 TIPS TO OPTIMIZE LOGISTICS RELATED EXPENSES
Updated: May 19
Tellerex identifies seven key strategies to optimize logistics-related expenses while maintaining service and performance levels.
"Logistics costs are on the rise across nearly all regions and industries." says Brian Lechlitner, Chief Operating Officer with Tellerex. “Business leaders usually start exploring cost-savings by attempting to negotiate better prices with their carriers. Those negotiations can be difficult, and success is often not guaranteed."
Lechlitner says, "Often overlooked are the actions these leaders can take to optimize the costs from within their organization."
1 - ELIMINATE COSTLY ERRORS
In logistics, errors occur regularly and often come at a cost. For example, shipments may be non-deliverable due to erroneous data, or containers may collect charges at ports because documentation is incomplete. To avoid errors and the associated costs, logistics leaders must identify the source of errors and continuously improve their shipping processes. "If you have to deal with errors regularly, there is probably a systemic process issue," Mr. Lechlitner added. "Lean principles and Six Sigma are great tools for detecting and eliminating such issues — and for optimizing costs."
2 –IDENTIFY PARTNERS WITH DIVERSE LOCATIONS
This one is pretty simple – the fewer miles you ship, the lower your costs will be. Find partners with geographically diverse locations to minimize expenses as well as the time to send or receive products. Look for partners that offer the same processes, capabilities, and tools regardless of their facility location.
3 - EVALUATE VALUE-ADDED SERVICES
Most logistics providers perform some form of value-added service. These services can be as simple as product labeling or as complex as full product customization. Outsourcing specific tasks to the logistics provider are convenient, but you should always evaluate whether the convenience is worth the costs. There might be a more practical approach, such as completing the service in-house or through a supplier at an earlier point in the supply chain process.
4 - CONSOLIDATE SHIPMENTS
Shipment consolidation can be a tremendous cost saver. Logistics leaders can align inbound and outbound transportation, so all trucks and containers hold as much capacity as possible. "If it's not possible to achieve a full load, consider collaborative distribution. When a non-competitor uses the same distribution center and the same carriers as your organization and delivers to the same retailers, why not work together to coordinate shipments and share the cost?", Mr. Lechlitner said.
5 – SIMPLIFY THE PROCESS
"Logistics doesn't have to be complicated," says Lechlitner. "Simplification can come by de-bundling your shipping rates or creating a cost-matrix with variables such as mileage and weight. Doing so allows for more accurate cost projections."
6 - ENHANCE INTERNAL COLLABORATION
In addition to external collaboration, internal cross-functional communications are crucial for cost optimization. For example, logistics leaders should know of changes in demand planning so that they can adjust transportation, warehousing, and labor capacities in advance — and, as a result, gain time to negotiate the best price.
7 - EDUCATE DECISION MAKERS
The final action to reduce logistics costs internally is likely the most important. Leaders must educate decision-makers about the trade-offs associated with these decisions. "If decision-makers want to lower transportation costs, delivery speed will also likely need to be sacrificed. If they prefer a lean inventory, transportation costs will likely rise. Decision-makers have to understand how actions related to logistics spending affect the organization's bottom line," Mr. Lechlitner concluded.
Tellerex is committed to leveraging our knowledge and experience to reduce ATM expenses accelerate their contribution to your bottom line. To learn more about our solutions, contact us by e-mail or visit us online.