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How to reduce logistics costs in 2019

Jan Tore Pedersen | 21. Dec 2018
4 minutes read

Poor logistics planning and decision-making can result in excessive expenditure, missed delivery deadlines and damaged goods. This being the case, optimising operational efficiency and reducing logistics costs is among the top priorities for any logistics service provider that strives to sustain his or her business in a cutthroat freight environment.

 

The challenge

Given today’s high customer demands and a fluctuating global business climate, logistics managers are facing more challenges than ever before. Cutting transportation costs makes the top of the list, followed by ...

  • Meeting growing demands for on-time delivery
  • Achieving total visibility across the supply chain
  • Achieving customer satisfaction (through customised solutions and efficient and reliable services)
  • Adhering to compliance and emission reduction regulations imposed by authorities

Additionally, staying on top of new advances in business processes has become an increasing challenge for logistics managers.

Consequently, a constant commitment to drive down costs is vital to survive in this hypercompetitive marketplace. To succeed, LSPs must rely on smart logistics management practices.

 

The solution

The only way to reduce logistics costs and supply chain expenditures is to use resources better. In other words, the energy use throughout the end-to-end journey of freight needs to be lowered. You can optimise the use of resources by:

  1. Filling trucks and other load units as much as possible, throughout the chain
  2. Seeking collaboration with other shippers (if your own volumes are not sufficient to fill load units)
  3. Increasing your volumes by improving customer satisfaction (using digital customer experience feedback)
  4. Increasing volumes by providing better visibility and transparency
  5. Using digital information to increase productivity in hubs

For logistics and transportation companies to achieve this, supply chain integration is key. Hence, companies universally are turning to cloud-based technologies for supply chain collaboration and interoperability. This is digital logistics.

Digital logistics – ie. getting rid of paper processes entirely, so that all information exchange between logistics stakeholders is electronic – enables LSPs to implement major strategic changes to provide visibility, reduce costs and increase customer service levels. SaaS solutions that run supply chains as open collaborative networks double the utilisation of trucks, enable a 50% emissions reduction and a reduction in freight costs of up to 35%. This gives companies a competitive edge in the challenging T&L market.

By enabling the smooth collaboration of multiple shippers of goods and multiple logistics service providers, the SaaS model and mobile applications can make the omnichannel retail marketplace cost-efficient and carbon-friendly for all involved. (Going green provides better return on investment.)

Cargo from a wide variety of shippers take the most efficient path to a given hub, where it is all consolidated into a single delivery to the end consumer.

 

A better cost structure with the pay-as-you-go model

For many companies, adopting new technologies can seem like an overwhelming and costly undertaking. However, implementing SaaS solutions requires low initial investments. You pay as you go – like electricity, as you use it. And you do not need to replace or disrupt existing systems. Besides, the SaaS model means there are no equipment or IT management costs. No professional IT teams are needed to manage the infrastructure. Upgrades are free, coming online as they are ready for implementation.

Read more: 5 key factors to driving profitability in logistics

 

Conclusion

Up to half the cost of many supply chains is ignored and unmanaged in outbound logistics and behind the closed doors of distribution centers. Much of this cost can be eliminated by applying efficient supply chain management techniques. The emergence of cloud-based solutions for supply chain collaboration has made this considerably easier and more affordable than ever before – so even small companies can take advantage of it, without risk.

By ensuring that operational resources are used as efficiently as possible, these new technologies meet logistics companies’ internal need for lower costs as well as those of their customers, who also want a low-cost, hassle-free and on-time delivery service.

 

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