How to Reduce Cost in Transportation Logistics? Master 8 Practical Ways for Cost Reduction

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Cost Reduction in Transportation Logistics

A good business is all about maximizing all the investments of effort and resource to its fullest potential, and is structured around a good budget structure. A freight cost reduction case study is extremely helpful in understanding an efficient way to reduce transportation logistics costs.

Freight is a crucial part of the company and company logistics. If not understood and addressed properly, freight can cost the company increased charges throughout the entire transport logistics. Regular fuel and machinery and market price rises are not the only rising costs to consider. Suppliers face many budgetary pressures in several other areas and directions too.

Reducing transportation logistics costs is number one priority for any company, when structuring out a profitable company budget. There are several ways to optimize transportation costs, improve the supply chain procedures and save money for businesses. These strategies for decreasing logistical expenses range from streamlining inventory levels, revising smarter shipping networks, providing better processes, improving relationships between suppliers and third parties, and so on and so forth.

A key component in reducing transportation logistics costs is providing a good customer experience. Treating the customer well, listening to their queries, helps improve business and enables a profit flow.

Master 8 Practical Ways of Cost Reduction in Transportation Logistics-

1. Creative and Out Of The Box Ideas

Flexibility and adaptability in transport modes helps to offset losses in ways that may not have been taken into account. Creative ideas and thinking out of the box is always helpful, as opposed to relying only on single modes. Freight shipping by sea is cheaper than air, but the time taken is liable to eventually cost the sales and bring down the profits and damage business.

It is important to look at transport costs for various modes and be ready to making the switch if necessary. Intermodal transport is another option available that is usually not considered when relying on single modes alone.

Rail transport falls much cheaper than road transportation. A combination of rail and road is a way to cut costs and stay on time and in budget. A way to help with mode’s flexibility is to reduce the use of the more expensive shipping options.

Very often when the buyer needs only a part of the shipment as early as possible, the company ends up expediting the entire shipment for the whole load. This naturally shoots up the cost. Instead, a good way of bringing down the costs is by only expediting the freight that is needed, and using cheaper modes for the remaining portion of the shipment.

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2. Shipping Consolidation Opportunities

For smaller weights, the “Less-than-truckload” (LTL) shipment is an economical option. Large shipments of different products or shipments for all buyers can be consolidated into one shipment to save cash, by using full load shipping (FTL).

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3. Warehousing Services

When shipping goods from point A to point B, especially over a long distance, storing products closer to the customers helps to drastically reduce transport costs.

Security considerations are an important part of freight management. Safety of warehouse operations is imperative. Unprecedented injuries are an expensive overhead cost and must be avoided at all costs. Also lack of warehouse safety can incur government fines that must be avoided.

Several security problems can result in the government closing down the operations. A safety manager, accountable for warehouse safety, is a necessity. Also, organizing ongoing safety training is definitely needed for all warehouse staff.

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4. Automatic Container Loading & Unloading System Reduces Labour Costs

Automatic container loading & unloading system is one of the best ways of reducing labour cost, avoid product damages, save costs of production and enhance productivity.

It is important to analyze ways of reduction of labour costs for any warehouse operations, as this helps to bring down overall logistics costs. Each project

should concentrate on the labour cost reduction. Labour management software systems are available which can help manage warehouse work.

Creating incentive programs for employees in the warehouse is also a good solution. Mobility in the warehouse within the four walls, results in overhead cost reduction. This increases overall individual productivity, and also, less staff and less equipment is needed.

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5. Use Preventive Maintenance

Preventive maintenance is used to reduce logistics costs as it helps to cut costs on just about any equipment. Emergency or breakdown maintenance is of no use. For instance, it can be expensive with regard to working hours, customer support, fatal accidents (safety), if the container is being unloaded, and the forklift dies. Hence preventive maintenance is a practical solution towards cost reduction.

6. Logistics Cost Reduction

Working together with suppliers to reduce costs is the best and the most effective way of logistics cost reduction. Sometimes suppliers can help cover some direct logistics costs. Buying in larger quantities helps bring costs down. Hence, creation of a consortium of buyers (a buyer and their suppliers) to purchase the necessary logistics supplies, like transportation fuel, at a lower cost, is a practical solution towards cost reduction.

A good way to go is to invite suppliers to the company facility, with a structured agenda, to analyze the goods and present logistics cost reduction ideas. The suppliers are usually experts in their respective field of expertise.

Suppliers help by continuing to work with the company in a win-win cost savings programme. The idea is to keep a part’s function, but drastically reduce component costs, without jeopardizing the quality. The quality must never be compromised.

7. Keep Customers Happy

Happy and satisfied customers help in keeping logistics support costs incredibly low, per order. One of the best supply chain cost reduction technique is to exceed customer expectations. This correlation between customer experience and cost reduction is a fast track way of customer retention too and is a way for

companies to effectively manage the enormous burden of reducing logistics costs.

This high correlation between client satisfaction and overall cost reduction needs to be fully considered, and customer service should be assessed accordingly for changes in logistics costs.

8. Optimization of Available Storage Space to Increase the Storage Density

Identification and requisite elimination of spaces must be done with clarity. Increasing the storage density in bins and racks by improving the use of vertical space helps maximize the use of space. Eliminating movement during transportation lowers the damage to shipping containers.

Making better use of available storage space, to increase the density of storage, making efforts to encourage organized operations linked directly to labour, efficient use of assets and accuracy of inventories are all different ways to avoid incurring unnecessary expenses, and help bring down logistics costs.

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