How to Deal with Increased Logistics Costs?

Transportation is an important component of the whole supply chain, and every business makes efforts to reduce logistics costs to optimize supply chain ROI. Transportation logistics costs are growing for various causes, the most prominent of which are geopolitical tensions generated by the Russia-Ukraine crisis and capacity shortages caused by worldwide port congestion. The periodic pandemic outbreaks in China, as well as the ensuing lockdown attempts, have further added to the rising transportation expenses.

Here are some of the current challenges in global transportation logistics that are driving transportation prices to rise:

• Rising costs of petrol
• Commercial drivers face a labour shortage.
• Port delays and congestion
• Limitations and laws governing international trade
• Elevated client expectations

For most supply chain managers, lowering transportation costs has become a crucial KPI, and for good reason! The supply chain ROI’s profit margins may be eaten away by hidden transportation expenses, eventually impacting the company’s bottom line. As a result, even a small decrease in logistics costs will significantly affect the business’s overall financial performance.

Try Multimodal

If you have been using only one mode of travel, you should consider switching to a multimodal approach since it would be quite cost-effective. For instance, if you like to go by sea since it is less expensive than flying, you might also want to consider whether the extra time is affecting your ability to make sales. The same holds when selecting rail versus a vehicle since rail transportation is more affordable.

Depending on your business and your customers’ needs, using a multimodal transportation plan can significantly help in reducing logistics costs. If your customer just wants a portion of your package to be shipped quickly, you might expedite that portion by utilizing air and choosing less expensive means for the remainder.

Streamline Shipments

A fantastic approach to reducing logistics costs is to combine shipments. Due to reductions given by the carriers, larger shipments often have lower rates. The optimum usage of this is for supply chain managers to combine the shipments for many clients into a single shipment. As the number of trips decreases, using full truckload transport (FTL) can assist in further cost savings.

Utilize Real-Time Visibility

Picture this: you can track your shipment from start to finish right as it happens. Imagine now how pleased your clients will be if you keep them informed on the status of their shipment. You’ll be better equipped to handle holdups and respond to issues. Plus, you’ll boost your customer satisfaction, which goes a long way in keeping them coming back. When you put all these pieces together, your company stands to save a lot of money.

Reduce operational obstacles

Operating in obstacles within the supply chain and other internal teams or a lack of process automation might result in unforeseen expenditures. In the supply chain, timely communication and transparency go a long way toward  reducing logistics costs

You must adhere to delivery schedules on time. Also, proactively report any delays, if any, to maintain goodwill with the client and maintain trust. Therefore working with all system stakeholders on schedule is essential to minimizing delays. Operational silos within the firm will eliminate by automating your shipment progress mapping procedure.

Logistics expenses are one of those components of a business that need controlling as they are unavoidable. Due to current issues in the supply chain, there will be substantial increases in costs. Net inflow from sales also demands aggressive plans on how they will retaliate and lower the supply chain cost.

Also Read:- 7 Key Goals of Logistics and How to Achieve Them

Use Data Analytics and Predictive Modeling

There is no doubt that data has become a strong asset to the logistics strategy in the current era. However, with the help of powerful data analysis or modeling tools, companies are finding better ways to cut costs. 

Preferably, begin by monitoring. And monitoring what has been done in the past regarding shipping routes, transit times, carrier operations, and their costs. This information will aid in establishing how to enable the best model for your logistics. However, these factors can include future requirements, potential interruptions of services in the future, and price increases. Most importantly, it allows you to correct inefficiencies that may be present in your systems at current.

Embrace Sustainable Logistics Practices

Though it may seem odd, using sustainable logistics practices can save you money in the long term. These practices help the environment and can boost your profits by cutting waste, boosting productivity, and making your company look good. Begin by trying to lower your carbon footprint. You could plan better routes to use less fuel, buy vehicles that use less gas run on electricity, or switch to other types of fuel. These changes might cost money at first, but they can help you save a lot on fuel over time. Also, think about starting a program to handle returns and recycle products. A good system for this can help you get value from returned items by fixing them up or recycling them turning what used to cost you money into a way to make money. It can also make customers happier by making returns easy, which could lead them to buy from you again.

Conclusion

Rising logistics costs are a fact of life in business. Companies should expect big jumps in supply chain expenses next year. It’s essential to have a plan for how your business will fight back to cut supply chain costs and stay profitable. By using several approaches together, firms can tackle the problem of higher logistics costs. 

However, these include:  Trying different transport methods, making shipments more efficient, using data to make better decisions, and adopting eco-friendly practices. With these tools, businesses can navigate the tricky waters of increasing logistics expenses. It will be crucial to remain flexible and receptive to new technology and approaches as the logistics industry develops further.