Logistics Cost Reduction: Best Practices

Logistics costs form an important part of the overall cost structure in any organization. The focus should be on renegotiating freight and shipping rates, reducing overall freight costs, and optimizing operations.

New Carriers – Constant checking of market rates is good practice. Logistics managers are generally comfortable with existing carriers. This leads to increased costs. The market rate check will reveal other more economical operations. New carriers can be more flexible in their quotes.

Freight Costs – There are several options to optimize freight costs. It is necessary to explore the renegotiation of the minimum billing to a minimum for a zone. Coordination of product delivery is another useful tool to optimize transportation costs. Currently, both the USPS and Canada Post offer viable small package options. Sometimes agreements with several smaller local carriers provide the best combination of rate and best service. The Internet offers excellent tools for comparing and optimizing freight costs.

Improve Shipping and Receiving – Simplifying shipping and receiving practices will deliver substantial savings. This can happen by reducing the window time to receive. The starting point should be the mandatory delivery appointments. A flow chart of all operations needs to be developed to determine wasteful processes and combine existing processes.

Technology: Internet tools allow a substantial reduction in paperwork. Documents are scanned and emailed to customs, ports, etc. In case of cross-border trade, documents must arrive at least twenty-four hours in advance to avoid delays at the border. The technology also enables the coordination of all shipments to optimize cargo.

Returns management: reverse logistics is an important element of transportation costs. Most companies offer a liberal return policy. If the customer is not satisfied with the product, they can return it in 30, 60, 90 days depending on the seller. Sometimes the seller also managed to pick it up. To minimize the costs associated with reverse logistics processes, it is necessary to optimize them.

Freight Cost Audit – Use specialized agencies that perform post-payment audits of freight invoices. These agencies are generally paid on a profit sharing basis. These audits also provide valuable information on patterns and other cost reduction opportunities.

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