Transportation expenses can eat up a large chunk of a business's overall budget for logistics, which is why many companies spend time and resources planning their logistics cost management strategies.
There are various factors affecting transportation costs in logistics. For example, when fuel prices increase, transportation costs can take up as much as 50 percent of the logistical costs. The challenge for online retailers is that so many online shoppers don't like paying for shipping fees and would instead buy from a business that offers free deliveries. For these reasons, it's necessary owners fully grasp how transportation expenses affect the bottom line before they can try to reduce it. Here are the basics and strategies for minimizing transportation costs in logistics across the board.
What is Transportation Cost?
Transportation costs are the expenses related to moving assets or products from one place to another, which are shouldered by the customer in many cases. For example, companies usually incur transportation costs if they need to bring products to stores or when online sellers deliver the goods to their customers.
How Can We Reduce Transportation Costs?
Keep Accessorial Charges at a Minimum
Many businesses end up spending more on transportation because of accessorial charges for additional services. The best way to cut down these types of charges for services outside pick-up and delivery is to improve communication with the carriers and customers complemented by accurate documentation. Companies need to understand how to satisfy their carriers to reduce these charges.
Digitizing Inbound and Outbound Logistics Processes
Manual processes produce so much operational inefficiency that also increases transportation costs—as such, streamlining operations by digitizing both inbound and outbound logistics processes paves the way for improved efficiencies and better management.
Improving Operations Through Analytics
Centralization of data helps lower transport costs as managers can review historical information easily to analyze trends that will help determine problem areas causing added costs and slow processes. For example, logistics managers may find out that one carrier tends to add more accessorial charges than another for the same service.
Make Your Company More Attractive to Carriers
Carriers are now quite selective about which businesses they want to partner with in the market. Making the business the shipper of choice to improve relationships with carriers will help to get preferential rates.
Improve Network Visibility
The ability to connect and communicate with all partners, including carriers, lets businesses gain better insights on what is happening in real-time, thus allowing personnel to respond and decide quickly on time-sensitive opportunities or other situations.
Tapping into New Data Sources
Smart devices offer businesses a chance to acquire a massive amount of data regarding the supply chain. Linking, generating, and centralizing data from smart devices are possible with the right solutions. Having new data relevant to supply chain operations aids in keeping transportation costs low.
How Does Technology Help Keep Transportation Costs in Logistics Down?
Many of the strategies above involve the use of technologies. Digitization of processes and records, real-time data gathering, analytics, tapping new data sources through smart devices, and network visibility all involve having the right technological solutions. Companies that are serious in keeping transportation costs down will do well by continuing to invest in the right tools and solutions to reduce transportation-related expenses to achieve more authority and profits.