Cost effective logistics in supply chain: Reduce transportation cost

Improving the cost efficiency of your supply chain largely depends on the logistics strategy you employ for last mile delivery. A plan for cost effective logistics in the supply chain can significantly reduce overall logistics costs.

There are tried and tested methods that are used by companies to reduce logistics costs. Strategies for reducing logistics costs can range from effective inventory management to using mechanised loading and unloading methods.

How can you reduce logistics costs?

There are many methods to decrease logistical expenses and transportation costs to increase your total profit. Here are a few ways that will help you reduce logistics cost:

• Warehouse at the right location

If you are a large-scale manufacturer distributing goods to wholesalers, then you would need a lot of space to store your goods. Especially if you have regular sales in a month then it would be wise to have a storage space for your goods.

Obtaining a warehouse close to the location of your customers can drastically reduce your transportation costs. When you forecast sales for a month and start production to meet the demand, you will need a dedicated space to store your goods.

If this location is closer to your customers, you can easily transport the products from the warehouse over a short distance leading to speedy delivery and customer satisfaction. Rather than transporting items over a long-distance multiple times, hauling the products in a single truck to the warehouse and distributing them to closer locations is more profitable.

• Consider using FTL, PTL, and LTL services

Partial Truck Load (PTL), Less than Truckload and Full Truck Load (FTL), services allow you to share a truck with other companies. This can drastically reduce transportation costs of your logistics operations.

A full truckload service uses a single truck to carry a dedicated shipment from a company where products stay in the same truck from pick-up to drop-off.  PTL shipping is used when the shipment only needs a part of the truck space. The rest of the space is used for cargo from a different firm, which means that multiple companies will share a delivery truck.

If you are looking for partial truckload services for your business, you can try Tata nexarc’s Logistics, a platform hosting multiple logistics partners who can offer the most affordable and hassle-free cargo movement.

LTL services are used for shipments that require less space than cargo of PTL services. This drastically reduces transport costs as you will be sharing the truck with many companies and payment is only for the amount of space and load used by the business.

• Reduce transportation cost

Fuel consumption for logistics operations coupled with driver charges can be a hefty sum. You can try and tie up with a fuel provider to get lower prices on fuel. Regular maintenance will prevent unwanted costs of breakdown and repair of the transport truck. This will significantly reduce the overall transportation cost.

• Use logistics technology

There are advanced logistics technologies that have come up since COVID-19. Digitisation of logistics processes can not only reduce overall logistics costs involved but also give logistics managers a better understanding of the entire supply chain. You can employ technological systems like modular shelving systems, warehouse robotics, automated storage and retrieval systems, and automated shipping.

For example, using automatic loading systems for containers can reduce labor costs involved in loading containers with products from the factory. Using logistics software to manage processes like warehousing, inventory management, transport management systems, etc., can contribute to cost effective logistics in supply chain.

• Optimise last mile delivery

Last mile delivery is the costliest component of the logistics chain. According to a Redseer report, the last mile delivery logistics market in India is to reach $6 billion by 2024. Finding the best fuel-efficient routes is the first step to reducing the cost of last mile delivery.

Poorly planned driving routes lead to increased costs. You can employ multi-stop route planner to assign routes to drivers who must traverse a lot of ground for delivery. This is an automated system which will help you optimise routes as per driving preferences, like avoiding highways, roadblocks, tolls, etc.

Other methods

Apart from the points mentioned above, when it comes to running logistics operations in a country like India there are certain other things to keep in mind. If your customers are in the rough terrains of India, you would need an adequate transport vehicle that can carry goods safely. This would either mean that you invest in a durable truck for transport or subscribe to a logistics service that has a wide reach.

Transport regulations in India add to the cost component of logistics operations as well. You will have to register your vehicle, obtain an e-Way bill, get a fitness and pollution certificate, etc. You will have to budget for processes like obtaining a registration certificate, pollution certificate etc.