Businesses might differ because of the services or products that they offer, but their main goal is always to meet customer needs. This becomes impossible if the customers are unable to receive those products and logistics is able to fix that issue – ensuring the success of a business.
The term logistics was coined in the military and it referred to obtaining, moving and the storage of equipment and supplies to troops in the field. In a business sense, it refers to the management of resources, materials, inventory from one location to the next. The goal of logistics is to ensure that customer requirements are met in a cost-efficient and timely manner. Some examples of the different logistics are Inbound Logistics, Outbound Logistics, Reverse Logistics, Green Logistics, Third-Party Logistics (3PL), and Fourth Party Logistics (4PL).
Logistics management focuses on organizing daily activities regarding the production of finished goods and services that a company offers. It manages resources such as supplies, consumable items or materials. Logistics management falls part of supply chain management and offers full visibility into the supply chain using historical data and real-time movement of goods through tracking. This ensures that there is a better flow of goods and that there is no danger of disruptions occurring.
There are different types of logistics management which emphasize different aspects of the supply process, these are:
- Supply: This type of logistics management is responsible for the planning and coordination of materials that are required at a specific time to be able to produce a task or activity. It includes transporting materials to where they will be stored.
- Distribution: This is the movement of stored materials to the locations where they are needed. It involves loading, unloading and transportation while keeping track of where the stock is and how it’s being used.
- Production: This manages the distributed stock into a product through the coordination of the assembling or manufacturing process to ensure that the required materials are available to make the final product.
- Reverse: This is the management of materials and supplies from production that are recalled. It could happen when unused or unwanted products are returned by a customer requesting to get a refund.
Logistics management is able to save costs for the business and create a better brand reputation as well as improve customer service through faster and more accurate deliveries.
How to Optimize Logistics Costs
Optimizing logistics costs should be something that logistics businesses aim to achieve. The following strategies will assist them in reaching that goal while maintaining the service they already offer.
1. Reduce Labor Costs
Businesses can choose to use Labor Management Software which is able to manage work within the warehouse in order to reduce labor costs. This would lead to less product damages without affecting productivity. Businesses can also rely on projects that focus on repetitive and structured tasks like voice-directed picking and robotics.
They can consider offering employee incentive programs to encourage their employees to increase their productivity levels. Not only does it increase the general productivity within the warehouse, but the dependency on more staff and equipment would be lessened.
2. Collaborate with Suppliers
Collaborating with suppliers is one of the smartest decisions to make when optimizing costs. Suppliers are able to take up some of the direct logistics costs that you would incur. One way this occurs is by forming a consortium with several other clients or buyers in an effort to purchase logistics supplies in bulk. When you do this you pay less due to purchases made in larger quantities.
Speak to your supplier and they might be able to assist as they may know more about the field. You can work on creating a program that you will both benefit from.
3. Preventative Maintenance
Preventative maintenance is able to reduce costs for business as we all know that prevention is better than cure. It costs a lot more to fix equipment, especially if they stop working in the middle of a job. It could lead to greater problems that affect customer service, productivity or the safety of employees.
4. Consider Different Modes of Transportation
The mode of transportation you use greatly impacts the transportation costs that you incur. For example, shipping freight by sea is significantly lower than using air. The difference is that it also slower which could influence your sales.
Prioritize your shipments based on the time the buyer expects them, choosing to use cheaper but more time-consuming modes for shipments that aren’t a priority and using the expensive option for those that are needed earlier. You can become flexible with the modes by splitting shipments of a buyer by sending them in portions, instead of totally using more expensive shipping options.
5. Keep Track of Inventory Levels
When you are aware of your inventory levels, you avoid overstocking inventory, which reduces inventory costs. Businesses can rely on Inventory Management systems that will provide them with up to date information regarding stock and allow them to make decisions about the amount of stock they should constantly have on hand.
6. Prioritize Customer Service
One way to save on logistics costs is to keep your customers happy as this guarantees customer retention. Businesses should aim to constantly exceed customer expectations, as this will reduce the burden of logistics costs from an increased number of order costs. Any measures or changes that are implemented should take the customer into consideration.