Any logistic system will include procurement, warehousing, and transport component. In the modern world, information systems are another critical component that forms the backbone of all the other three elements. The operation of all four elements will require human and capital investments and certain material inputs.
Now, to obtain the best profits, an organization needs to arrive at an optimization between minimum resource cost and maximized performance. This is where the role of cost assessment and analysis comes into the picture.
In this article, we shall throw light on the ways logistic firms can work on their cost management techniques and ensure maximum profits for the organization in question.
5 Effective Cost Management Tips For The Logistics Industry
Define The Major Factors That Define Cost
In the world of logistics, two significant factors contribute to the overall cost of the transport system: the total distance that needs to be traversed by the vehicle and the overall capacity of distribution in the system. For effective cost management, one needs to design a logistic system that links the cost drivers in the most efficient way.
An example would be the fact that the number of vehicles and the load-bearing capacity of each vehicle will decide the total number of trips required to successfully deliver a consignment.
From a logistic perspective, any alteration at this point will affect the system design, and its impact can be observed in the frequency of orders that the organization takes up and the rate of on-time deliveries.
Fleet managers and logistic planners spend a good amount of their working day planning to work their way around assessing such cost deciding factors of a transport business.
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Work On Reaping The Benefits Of Technology
The world of transport today is very different from what it was a decade ago. Investing in technological aids is an effective means of managing the cost. A good example in this regard will be that of opting for equipment tracking devices.
The asset trackers allow planers real-time visibility on their assets and track factors like rash driving, frequent detours, and others that eat into the revenue of the firm.
In the event of any trespassing, theft, or damage to the vehicle, such technological aids are of help to the police and allow faster resolution of the issue. In fact, certain insurance service providers offer premiums at a lower rate to logistic firms who have GPS enabled fleet.
It is to be noted that investing in asset trackers will also allow organizations to identify their top-performing drivers and reward them suitably. This will act as positive reinforcement and encourage others to perform better, thereby giving you better value for money for the investment you make on them.
You can look at this article to learn more about the role of technology in cost management and logistics.
Seek Appropriate Insurance
A common mistake that logistics organizations often make is that they cut down on the insurance as a part of their general cost-cutting measures.
In the event of an unforeseen event (something that is really common in the world of logistics), this is what costs organizations all their profit. An easy way to tackle such situations is to have proper insurance in place.
While talking of insurance, make sure you have auto insurance for your vehicle as well as cargo insurance for the goods under transportation. If you do not want to land in an unpleasant situation, see to it that your insurance cover takes into account the actual cost of the product.
It is a good idea to consider the schemes of different service providers and identify the insurance that works the best for you. Then, stick to the same insurance providers for your repeated cargo consignments.
This will establish a certain level of loyalty between the insurance provider and the logistic firm, and that often makes them eligible for lower premium rates.
Access Your Fleet Management Needs
Fleet management is a Herculean task as it involves the collaboration of hundreds of people. From ensuring ELD tracking to vehicle acquisition, there is a lot to do, and that leaves ample room for cost-cutting.
Start by integrating all the supply chain operations of your fleet into a single platform. This step takes away any risk of duplication of work that hampers the productivity of the company and results in unnecessary excess cost.
To do away with any unnecessary fuel wastage in your fleet, try to instate fuel efficiency programs in the system. The key to optimizing fleet management and cutting down on unnecessary costs is to ensure that each vehicle in the fleet is in perfect working condition.
Take a glance at this article to understand how effective fleet management can result in monetary gains for your logistics firm.
Consolidate The Packages
As much as you must care about saving on costs while a shipment is in transit, you cannot ignore the cost-cutting measures on the packaging. It is worth the efforts to direct your energy into planning on the packaging of your shipments.
As much as possible, try to ship your shipments in full container loads (FCL) instead of less than a container load (LCL). That way, you do not have to pay for unused space.
You also won’t have to share your space with other vendor goods, which often results in undue customs delay. In certain special cases, LCL may be the economically viable option, and you need to identify such situations.
The excitement of working in the planning division of a logistics firm is the immense scope of cost-cutting. If you know where and how much to cut without compromising on service quality, then you have got things in order. Knowing this is the actual challenge, and some of it comes only with experience.
This is a very crucial task as any small miss on your part will result in substantial losses for your firm. At the same time, you can drive your organization to newer heights of financial achievement if you are on point with the planning.