Ever since COVID-19 arrived in early 2020, the world’s supply chains have seen logistics go haywire, with costs skyrocketing and capacity dwindling. As a result of different economic developments, logistics costs continue to increase across every type of transportation and many companies feel the pain.
As companies continue to manufacture and source materials from overseas, controlling costs remains a top priority for those involved in international trade during the pandemic. Fuel prices remain high and ports continue to experience delays, resulting in higher transportation fees.
The following are tips for your business to reduce logistics costs during and after the pandemic.
1. Identify Fixed and Variable Costs
You must have a clear understanding of fixed costs and variable costs. Variable costs are those that fluctuate with volumes such as labor, fuel charges, or packaging. Fixed costs are those that do not vary with volume. The costs of electricity and management are mostly fixed unless there is a variable component like an extra shift.
2. Automate Warehouse and Logistics Processes
Warehouse automation helps automate the movement of various aspects of the supply chain, including inventory. By automating, warehouse and logistics staff can do more with less work, which typically increases productivity and reduces payroll costs.
If you send partial shipments to the same place every week, it is far more efficient and cost-effective to consolidate multiple partial shipments into one full shipment. This process can minimize the total number of loads you have to pay for, therefore minimizing your costs to the bare minimum that is required.
4. Outsource Logistics to a 3PL Company
Third-party logistics providers reduce logistics costs immediately. A 3PL provider not only specializes in logistics, but they also maintain a larger network of warehouses, fulfillment centers, and logistics providers so they can offer complete service customization, superior business intelligence, and end-to-end logistics solutions.
When you know exactly how much money is being spent on each area, you can decide which variable or fixed cost you can cut.
5. Focus on Forecasting
Unpredictability is one of the biggest supply chain costs, especially inventory and transportation costs. The more you can improve the accuracy of your demand-forecasting, the better you are able to control operational costs. In your business, using forecasting software and anticipating when business will pick up, decrease, etc. can help avoid extremely large unexpected costs.
It is possible to reduce logistics costs by making some tweaks in supply chain processes.
The right tools and technologies like industrial weighing scales will save you money. Identify the areas where you can make the necessary changes and implement them. Balancing the need to reduce supply chain costs while maintaining high service standards is no easy task during the supply chain crisis. Perhaps, the most important thing to remember is not to focus on “being cheap” by seeking the lowest prices for everything, but rather to consider the long-term value in every financial decision that’s made.