How to reduce the cost of logistics?

The costs of logistics companies vary in a wide range – from 10% to 45%, depending on the nature of the business. But whatever the firm does, the need to cut costs is always present. Reducing costs in this area helps to free up additional funds that can be spent on development or allow to compensate for losses in another direction, stabilizing the market position.

Unfortunately, economists often deal with the optimization of expenses of the logistics department, which can lead to unpleasant results. Let’s give a simple example. The company delivers the goods to retail customers “Gazelles”, and wholesale five-ton “MANA”. At the same time, taking into account the additional discounts of wholesalers, the cost varies (let it be 2.5% on wholesale and 1.5% in retail). But at the enterprise there is only one item of expenses “On delivery”, where fuel, depreciation, staff salaries are recorded.

Economists sit down for the calculations and see that it is possible to cut fuel costs (since they only see the expense in money), not taking into account the large consumption figures for heavy transport. As a result, the car will be stuck on the road without fuel, which will have to be delivered urgently.

The morality is simple – always call on the budget planning meeting of the head of the logistics department or resort to the help of an expert from outside. He will be able to offer other, effective ways to reduce costs. In particular:

• Reduction of the logistics chain by eliminating duplicate actions, combining processes, expanding the duties of employees;
• Search for cheaper resources, substitutes, for example, purchase of fuel from Avias, instead of Wog, BU pallet instead of new ones;
• Exclusion of activities that do not add value;
• Introduction of progressive methods of work, increase of speed of communication of employees thanks to digital means;
• Modernization of equipment and fleet, purchase of energy-efficient facilities;
• Optimization of the technological process, for example, the transition from hexagonal to square packing, to place more cargo on one area;
• Establishment of closer interaction with suppliers and consumers for the competent distribution of functions and responsibilities, which, at least, will increase the speed and optimize the warehouse.

As you can see, there are a lot of ways and everyone deserves a separate consideration. In order to find the optimal one, it is necessary to study in detail all logistical processes and articles of expenses of your enterprise. Only knowing the specifics, it will be possible to choose the right methods of saving, without worsening the quality.