Cost reduction is a crucial subject in logistics and we often see companies struggling to devise strategies to achieve cost reductions. In today’s blog post, we will go over five key areas that you can focus on if you want to improve the bottom line of your logistics business by reducing costs.
1.Inventory Level Management
Maintaining an optimal level of inventory is the first area for you to focus on if you are looking at reducing costs. Getting rid of excess, obsolete, and slow-moving inventory periodically can reduce your storage costs. On the other hand, ensuring that there is enough inventory and quick replenishment in case it is low, can result in cost reduction. This is because the longer it takes to replenish, the more stock is required to be kept in stock, bumping storage costs up. You should consider implementing an inventory system, which tracks sales and stock in real-time, letting you automatically re-order stock, when necessary.
2.Inventory Accuracy
Target 98% and higher inventory accuracy to reduce costs and save time. Inaccurate inventory can result in unpredictable backlogs, which in turn can result in high costs. Regular inventory checks and accurate inbound procedures will improve and simplify all other warehouse processes (GIGO Garbage in, Garbage Out). For example, barcoding is integral to keeping accurate inventory counts. Simply scanning barcodes on items or groups of items upon fulfillment can not only communicate the inventory changes to the system automatically but also helps track inventory throughout the cycle, making it easy to locate and make accurate reordering decisions. Accurate re-ordering curbs redundant costs.
3.Storage Handling
Efficiently utilizing your storage facility is another area that you must not ignore if you want to save time and reduce costs in logistics. For example, separating the high value/fast-moving stock from the lower value and placing them in strategic locations of a warehouse can considerably reduce pick up times. Depending on smart storage handling and a sound location strategy, you could also look at consolidated shipments involving several smaller shipments from multiple suppliers with the same destination into one consolidated shipment.
4.Inventory Automation
For logistics businesses to reduce costs and save time, automation is vital. Standardizing and automating repetitive, structured tasks streamlines them and helps them be done more efficiently. Further, inventory management automation also increases accuracy and reduces human errors and guesswork. Automation enables you to ensure that your data is always up-to-date and can also generate orders based on pre-set metrics. Automating your inventory management can make your business more competitive. By leveraging an automated inventory system, you can save money, save time, and increase inventory accuracy. It will improve reporting to help you make more effective business decisions.
5.Collaboration with Suppliers
Collaboration with suppliers can help reduce costs in your logistics business. Educating suppliers can help improve the quality of inbound, which in turn has a direct implication on cost savings. If your suppliers have full clarity on how you would want to receive your goods (let say with correct barcodes), then you can receive products without having to unpack them which saves on your resource costs. You can also use solutions like Electronic Data Interface (EDI) to communicate with your suppliers to optimize your supply chain.
