Logistics operations are core to any successful supply chain management. The two are so closely related that they are often lumped together or mistaken for each other. Because logistics is critical to the supply chain, minimizing costs and maximizing efficiency in logistics operations will reverberate across the supply chain.
By their nature, logistics operations are complex. Transporting and distributing goods across any mode (sometimes simultaneously) while using various means (vehicles) can be difficult to track, manage, and improve. But if done right, it could go a long way to minimize the cost of operations and improve the outputs.
Cost minimization problems translate to lack of efficiency in the process. In this article, we will explore four strategies for minimizing costs and five strategies for maximizing efficiency in logistics operations.
Strategies for Minimizing Cost of Logistics Operations
10% of a company’s expenses is tied up in logistics and supply chain operations. Therefore, minimizing the cost of logistics can go a long way toward a supply chain’s cost-saving efforts. The supply chain or business can also channel the same cost to other parts of the supply chain and business operations. Logistics costs are divided into fixed and variable costs. One can leverage certain strategies to minimize costs across the entire logistics operation.
Outsourcing the Logistics Process
Outsourcing transfers business and supply chain processes to another business to manage. These businesses taking up the mantle are typically set up for the sole purpose of helping these supply chains optimize such a process. The best part is that it comes at much lower costs.
The primary reasons for outsourcing are improving efficiency and minimizing input costs. Logistics operations are one of the most outsourced supply chain processes because they can be difficult and expensive to manage, particularly for smaller businesses or industries with no expertise in the process and a desire to minimize total cost subject.
For instance, big technology and fashion companies often outsource their logistics to focus on their core operations. Managing logistics can be a nuisance when lacking the right resources, expertise, and experience.
With outsourcing, businesses and supply chains can significantly minimize the cost of logistics by shipping off the operation to suppliers better suited to handle it. These suppliers are known as 3PLs (third-party logistics providers), and they are businesses with the necessary expertise, experience, and resources to help reduce the cost of operations.
By outsourcing the entire logistics process, the business never has to worry about the efficient maintenance and navigation of the whole logistics process. It doesn’t matter which mode: marine, road, rail, or air. Third-party logistics providers can always help make the process easy enough. More importantly, it will save the business tons of resources.
Improved Communication
Communication is the glue that keeps the supply chain going. When done effectively, it can reduce errors, delays, and misinformation. All of these also play a significant role in reducing or minimizing the cost of the logistics operation and enhancing its efficiency.
Communication is essential to both internal and external parties in the logistics process. It also has to be clear, concise, and on time to be effective. One of the key performance indicators of good communication is that you enjoy a seamless process that allows for enhanced operations.
Economics of Scale
One of the key ways to minimize logistics costs is establishing strategic relationships with suppliers. To do this, businesses must give them enough of their logistics activities or “businesses” to make it worthwhile. A good example of a strategic relationship is that between McDonald's and Coca-Cola.
Doing the same in your logistics operations will go a long way to ensure that the suppliers prioritize your logistics operations. This means giving your shipping operation a clear advantage over their other customers because they know your business is worthwhile. Doing this is known as economics of scale. It gives you better leverage when negotiating freight rates.
Sustainability Initiatives
Sustainability is a big aspect of today’s supply chain operations. While businesses are reluctant to prioritize it because it seems too expensive, especially in the logistics arm of any business operations, sustainability is a cost-minimizing concept that pays for itself.
An electric truck (when it is readily available) will cost the logistics and supply chain more as an initial investment but will ultimately cost less and have a better ROI than other vehicles. Route planning software and other tracking solutions may be costly to implement, but the fuel it saves the supply chain will more than makeup for it.
Strategies for Maximizing Efficiency in Logistics Operations
Maximizing efficiency in logistics is important for several reasons. Chief of them is customer satisfaction through improved lead times, fewer mistakes, and improved service offerings. You can leverage a few strategies to achieve efficiency in logistics operations.
Optimize Transport Process
The transport process is the main feature of the logistics operation. It is what transfers the goods or cargo between locations. Optimizing it can enhance the entire logistics process and ensure cost savings for the entire operation. To optimize the transport process, do the following:
Route Planning: Leverage software for route optimization that allows you use the most efficient route possible, reducing time and fuel costs.
Multi-modal strategy: You don’t have to depend on one mode of transportation. If using multiple modes will make your operation more efficient, then by all means, go for it. Examples of multiple modes could be road and air, road and marine, rail and air. There are situations where supply chains have had to use more than two.
Maintenance of Vehicles: One of the major causes of slow and inefficient logistics operations is the breakdown of vehicles or accidents due to poor maintenance. To avoid such a situation, integrating preventive maintenance into the logistics operations will prove helpful.
Leveraging Technology
Technology solutions are critical in logistics operations. They enhance communication, simplify the process, and ensure visibility and transparency of the operation. This way, there is better decision-making, precision, and improved outcomes.
Integrating technology solutions like transport management systems helps manage the entire logistics operation, including scheduling shipments, resource management, and coordinating the entire operation. By integrating technology into logistics operations, you can also enjoy improved communication and shipment tracking, leading to better visibility, transparency for all stakeholders, and overall supply chain efficiency.
Culture of Continuous Improvement
A culture of continuous improvement in logistics operations means embedding improvement as part of the logistics operations. It applies to the people and process in the logistics and supply chain. A culture of continuous improvement means always looking for opportunities to improve the logistics process.
It could be through technology, innovation, or by improving the skills and expertise of people in the logistics operations. It could also apply to suppliers, especially the strategic kind. This culture can be hard to integrate because it needs total buy-in from all the personnel and parties involved. It could also take up a lot of resources.
However, it pays for itself when implemented, creating an increasingly efficient system that uses lower costs to produce high-quality outcomes.
Lean Logistics
This strategy is focused on running an operation that is totally void of waste. Waste of resources takes more time than it is worth. It can negatively impact the outcome of the process and reduce the quality of service being provided.
Running lean logistics will mean identifying certain activities that are redundant and do not add value to the entire shipping operation. For instance, why get stuck on searching for freight forwarders with the best rates when you can leverage the Silq platform for a seamless shipping experience?
Improved Supply Chain Planning
Planning is a very important strategy if you have any chance of improving the efficiency of the logistics operation. Supply chain planning entails properly coordinating resources, suppliers, and processes in the supply chain to achieve the ultimate goal. It can enhance the logistics processes if done properly because other aspects, such as inventory management, distribution, or manufacturing, will not delay the logistics operations.
How Silq Helped O.A. Apparels Improve Its Logistics Operations
When you think of apparel, the last thing on your mind is logistics operations. Well, that was the same situation with O.A. Apparels. While the company is an exciting upstart in the fashion industry, its logistics operations were slacking. You could say it was a sore sight for many of its customers. The company rarely shipped on time, and the logistics process was riddled with delays, high costs, and inefficiencies.
O.A. Apparels’ product was good enough for customers to overlook its logistics problems, but it was only a matter of time. And the company knew this.
While searching for a solution, the company came across Silq, a freight-forwarding platform that allows shippers to effectively manage their entire logistics operations with the aid of experts, unprecedented resources, and a tech platform that helps coordinate it all from rates, to customizable workflows, and 100% visibility.
Immediately after O.A. Apparels onboarded the platform, Silq sent field operatives to its manufacturing facilities to monitor the process and effectively plan the rest of the supply chain. This took off splendidly for the company, and its logistics operations were under control in no time. It was more effective because of improved supply chain planning, leveraging technology, and implementing some aspects of the lean principle.
O.A. Apparels started shipping faster and smarter, with improved rates, because they made Silq a strategic partner and took all their goods across the Silq channel. It was a win-win for the company. It made good clothes before but now also enjoyed improved logistics efficiency that meant they got products to their destinations on time and effectively.
Why The Silq Platform Can Help In Maximizing Efficiency in Logistics Operations
Silq is a freight forwarding platform that tackles the three biggest reasons for unpredictability in the shipping operation, be it production delays, inconsistent shipping options, or logistics errors. By tackling all of these through a combination of expertise and technology, the platform allows shippers to enjoy more streamlined and flexible logistics operations, ensuring their goods get to where they need to be on time and under the right conditions. Connect with us today for a relaxed shipping experience.
