It is hard to think of a time when the logistics industry received so much attention. The widespread disruptions caused by the recent pandemic left global logistics in disarray, with severe backlogs, congestion, and sky-high prices. As the world struggles to get back on track, this renewed focus on logistics has placed greater importance on the ability of businesses to maintain the integrity of their supply chains and to do so in as cost-effective a manner as possible.
Logistics is a complicated industry plagued with uncertainty, where small mistakes can result in high costs. However, when done right, companies can turn logistics from a necessary burden into a competitive advantage.
Focusing on cost first tackles the effect before the cause and fails to recognize one of the most important variables - time. When looking to reduce logistics costs, businesses often spend too much time looking for cheaper alternatives and not enough time understanding their own internal operations. Rather than come at the problem from purely a cost perspective, it is vital to first develop sufficient visibility over your supply chain in order to answer a seemingly simple question: what do you need and when?
This question can be surprisingly tricky to answer, and doing so can expose gaps in knowledge or process that will need to be resolved before businesses can make any real progress. However, once addressed, this will provide the foundation for a logistics strategy that will allow you to plan ahead and better forecast shipments, opening up new cost savings opportunities and bringing more stability to your supply chain.
Once you know what you need to ship and when, you will be able to consolidate your freight, sending more products less often. This strategy reduces the overhead expense and leverages economies of scale on each shipment.
How you ship your products is also important. Packaging technology has improved over the years, so it’s worthwhile to research the best lightweight packaging material for your products. More importantly, however, is to optimize your packaging by ensuring that the packaging you're using is the right size. Simple improvements in packaging efficiency can have knock-on effects further along the supply chain, such as reduced warehousing costs and lower carbon footprint.
Depending on the size and complexity of your business, it may be worth considering outsourcing your logistics. Beyond the immediate advantages of increased operational bandwidth, outsourced logistics companies often possess infrastructure and automation that offer improved efficiency and cost savings that outweigh any commission or premium you might pay.
Furthermore, finding the right outsourced logistics company that is partner agnostic and evolves with you as you grow can introduce new areas for optimization, such as shorter shipping routes, better carrier rates, and import duty advantages.
Logistics is a complicated industry, fraught with uncertainties, volatility, and jargon. However, businesses that can take control of their logistics can turn it into a competitive advantage. Developing a deep understanding of your business operations through xP&A will put companies ahead of the rest by allowing them to take a proactive rather than reactive approach to logistics.
By leveraging this knowledge, businesses can work through a practical checklist of items to gradually and methodically lower the costs and increase the efficiency of their shipping, providing new opportunities for growth.
Edward RouthFounder of Relloe