Reducing logistics costs can seem overwhelming, with so many factors to consider and constant pressure to deliver results.
However, focusing on just on specific area can drive significant savings.
Let me walk you through it by watching the video below.
Simple Logistics Cost Reduction: How to Tackle It
Many organizations are struggling with logistics costs right now. With rising expenses, tight resources, and stagnant sales, logistics and supply chain leaders face tough challenges. It’s a time when you’re being pressured to reduce costs from all sides, but it can feel impossible to know where to start.
Here’s an easy technique to begin reducing your logistics costs.
The Complexity of Managing Logistics Expenses
Let me start by showing you a diagram that helps explain why logistics cost reduction can feel overwhelming. Imagine senior executives pushing you to cut costs, and you’re faced with so many areas to consider. From sourcing and procurement to inbound shipping, warehousing, inventory costs, outbound transport, and customer delivery—there are many pieces in play. It can feel like juggling 20 balls in the air at once, with some inevitably dropping.
So, where should you begin? If you were hoping I’d give you a prioritized list of actions to take, I’m not going to do that. Instead, I’ll focus on one area that has consistently helped our clients cut costs over the years.
The Cost of Servicing Your Customers
This focus is on the cost of servicing your customers—specifically looking at order size and order frequency. I’ve mentioned this before, but it’s still something many organizations overlook. Take a look at your customer delivery order profiles—what are the order sizes, and how often are they placed? Typically, you’ll see a bell curve with lots of small orders, a few large ones, and some in between.
It’s those smaller orders that often cause the most pain. If you can increase the size of those orders or reduce their frequency, you’ll be well on your way to cutting costs.
Focus on the Small Orders
Examine the cost of delivering those smaller orders. If you can increase their size or reduce delivery frequency, you’ll reduce the cost per order. This might seem like a small change, but it can have a big impact. Many companies send small orders multiple times a day, which isn’t efficient.
Finding a Win-Win with Customers
You might be thinking, “But customers want smaller, more frequent orders.” That’s true, but many customers will be open to alternatives if they see the value. For example, you could offer a discount if they agree to order in larger quantities or reduce delivery frequency. It’s about framing it as a mutual benefit.
How to Get Started
To ensure whether this applies to your business, I recommend using a quick self-audit. Spend three minutes answering a few questions, and you’ll get an instant report to show whether small orders are driving up your costs.
Visit this link to get started: Supply Chain Profit Leak Audit
Related articles on this topic have appeared throughout our website, check them out:
- How to Improve Warehouse Layout Efficiency and Save Costs
- Energy and Labour Costs: 2 Top Warehousing Challenges
- Cost to Serve Analysis—And the Costs of Neglecting It
- 12 Smart Ways to Reduce Your Freight Costs
