It is important to consider that the average, online retailers spend 11% of their sales costs on logistics. This means that if you sell a product worth Rs 100, you’ll likely spend around Rs 11 on its storage and transportation. Logistics is critical for the delivery of most consumables, managing the flow of goods and services from origin to consumption.
Logistics companies are constantly seeking cost-effective ways to manage their supply chain. Efficiency and cost-effectiveness are key to success.
By reducing logistics expenses and improving efficiency, companies meet customer expectations to deliver products faster. Improving logistics efficiency is essential for a company’s success as it streamlines operations, minimises downtime, expedites delivery, and adds value to the business.
Hurdles in adaptation
Achieving cost-effectiveness and efficiency in logistics can be challenging due to the unique set of obstacles that come with any change. Proper visibility into the supply chain is crucial for achieving logistics cost-effectiveness. However, poor data quality can be a significant hurdle, making it difficult to identify areas of inefficiency or potential cost savings. In addition, poorly planned and scheduled operations can drain resources, time, and money, negatively affecting the supply chain’s overall cost-effectiveness.
Fortunately, there are strategies that can help achieve both goals simultaneously.
The keys to success
In the current era of cut-throat competition, minimising logistics expenses and enhancing operational efficiency have emerged as indispensable elements for logistics enterprises.
Here are some pivotal strategies that can be employed to ensure a thriving and lucrative business.
Optimising processes: This is a proven strategy for companies to reduce logistics costs and improve operational efficiency. By automating routine tasks and reducing manual procedures such as booking, document management, and shipment tracking, businesses can achieve streamlined processes. The increase in automation leads to fewer errors and enhanced speed, enabling businesses to achieve their goals more efficiently.
Analyse transportation networks: To optimise shipping operations, businesses should carefully analyse transportation networks. This involves evaluating various shipping routes and modes of transportation to identify cost-effective and time-efficient options. Key factors to consider include distance, traffic congestion, delivery urgency, shipment volume, geographic scope, and cost-efficiency. This method can help businesses improve their shipping operations and reduce costs while ensuring timely delivery of their products.
Consolidations: Freight consolidation merges smaller shipments into larger ones to minimise transportation costs and enhance efficiency. Consolidating shipments decreases the number of shipments to manage, allowing companies to optimise their transportation networks. Benefits include reduced transportation costs, improved efficiency, and better delivery times. Freight consolidation is an essential process that can improve logistics operations, increase profitability, and competitiveness.
Minimising inventory holding costs: The minimisation of inventory holding costs is a critical financial consideration for businesses. As such, it is imperative to explore effective ways to decrease these expenses. One such approach is to reduce inventory levels, which directly translates to diminished storage costs.
Through a comprehensive analysis of historical data, market research, and customer insights, businesses can optimise their inventory levels and maintain an efficient and lean supply chain. By implementing these strategies, businesses can successfully achieve cost reduction while ensuring the efficient and effective operation of their supply chain.
Packaging 2.0: This is all about designing efficient and effective packaging that helps to prevent damage to products during transportation. Poorly designed or inefficient packaging can result in damaged products, which in turn leads to additional transportation costs to replace or return the products. In addition, ineffective packaging can result in suboptimal space utilisation within freight containers or vehicles, leading to wasted capacity and the need for extra trips to accommodate the same volume of goods. All of these extra transportation costs can quickly add up and have a significant impact on a company’s bottom line.
Staff training: To increase logistics efficiency, staff training is crucial. Simply acquiring advanced technology isn’t enough. Employees need to be confident and proficient in using it. A comprehensive training program should be established to equip them with the necessary skills. Ongoing training opportunities should also be provided to enhance their expertise, resulting in increased value to the company.
Interdepartmental communication: Effective communication among different departments is paramount to ensure efficient logistics. Prompt resolution of issues necessitates expedited information flow between departments regarding warehouse backlog or any delay in the supply delivery fleet. Therefore, it is vital to enable seamless communication and access to a shared information repository among departments to maintain logistical efficiency and streamline problem-solving.
Invest in technology and software: Invest in technology and software to enhance logistics operations. Technologies like GPS tracking, IoT, big data, machine learning, and RFID can help achieve supply chain control. Logistics automation can save time, cut costs, and speed up order processing to build a lean supply chain.
Key performance indicators (KPI): It is important to continuously track and measure the performance of your business logistics. KPIs such as perfect order metrics, distribution metrics and warehouse KPIs can help you understand your logistics performance at any given time. To make sense of this data, you can run real-time supply chain analytics that provides valuable business insights.
Relocation companies can benefit from considering coastal shipping in Kerala as it is a cost-effective and efficient mode of transportation for certain types of cargo. The government has introduced incentives and policies to encourage businesses to explore this mode of transportation. Coastal shipping reduces transportation costs and is also environmentally sustainable. Additionally, it provides easy accessibility to major ports within Kerala, including Kochi, Vizhinjam, and Beypore.
Shipping by train is another viable option to consider, depending on a number of factors including the type of cargo, distance, cost considerations, and environmental impact. Trains are generally a more cost-effective mode of transportation for long-distance bulk goods, as they can carry large quantities of cargo at a lower cost per ton-mile.
Additionally, trains are more energy-efficient and have a lower carbon footprint per ton of cargo moved, making them an environmentally friendly option. Therefore, the choice between train and road shipping depends on a company’s specific requirements and situation.
In conclusion, implementing supply chain technologies can help companies simplify their operations, cut down on expenses, and enhance their service quality. In addition, adopting sustainable approaches, such as reducing carbon emissions and optimising packaging, can enable businesses to minimise their environmental footprint while also appealing to eco-conscious consumers.
Rahul Pillai, Founder and CEO of Hybrid Shifting Solutions India Pvt. Ltd.
