Tellerex identifies seven key strategies to reduce logistics-related expenses while maintaining service and performance levels.
Logistics costs are on the rise across nearly all regions and industries. When business leaders explore cost-savings initiatives, they usually begin by trying to negotiate better prices with their carriers. Those negotiations can be difficult, and success is often not guaranteed.
Brian Lechlitner, Chief Operating Officer with Tellerex, a provides insight into seven often overlooked strategies you can take to reduce these costs from within your 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 errors regularly, there is probably a systemic process issue. Lean principles and Six Sigma are great tools for detecting and eliminating such matters — 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 locations.
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. While outsourcing tasks to a logistics provider may be more convenient, you should 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. When a non-competitor uses the same distribution center and carriers, work together to coordinate shipments and share the cost.
5 – Simplify the process
Logistics doesn't have to be complicated. 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 reduction. 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, have time to negotiate the best rates.
7 - Educate decision-makers
The final action to reduce costs is likely the most important. Leaders must educate decision-makers about the trade-offs associated with decisions. If decision-makers want to lower transportation costs, they'll probably need to sacrifice delivery speed. If they prefer a lean inventory, transportation costs will likely rise. Decision-makers should understand how actions related to logistics affect the organization's bottom line.
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