5 Actions to Optimize Logistics Costs
Logistics leaders face pressure from their stakeholders to optimize logistics costs while maintaining service and performance levels. Gartner Inc. identifies the following five actions to help you optimize costs from within your organization.
1. Eliminate costly errors. In logistics, errors occur regularly and often come at a cost. For example, shipments may be non-deliverable due to flawed data, or containers may collect demurrage at ports because import/export documentation isn't complete. To avoid future errors and their associated costs, logistics leaders must identify the source of errors and continuously improve their shipping processes.
2. Evaluate value-added services. Most logistics providers perform some form of value-added service. These services can be as simple as product labeling or as complex as full product customization. Outsourcing certain tasks to the logistics provider is convenient, but logistics leaders should always evaluate whether the convenience is worth it. There might be a more cost-effective approach, such as completing the service in-house or through a supplier at an earlier point in the supply chain.
3. Consolidate shipments. Shipment consolidation can be a tremendous cost saver. Logistics leaders can align inbound and outbound transportation movements so all trucks and containers hold as much capacity as possible.
4. Enhance internal collaboration. In addition to external collaboration, internal cross-functional teams with other groups in the supply chain are a key factor for cost optimization. For example, logistics leaders should know about changes in demand planning, so they can adjust transportation, warehousing, and labor capacities in advance—and thus gain time to negotiate the best price.
5. Educate decision makers. The fifth action to reduce logistics costs internally is probably the most important. Leaders must educate decision makers about what their decisions mean for logistics and inform them about expenditures and trade-offs.