As per the global standards, the cost of logistics should be 8-9% of the cost of product. Unfortunately, in India, it is nearly 1.5 times that of the global standard, hovering around at 13-14%. That’s why most logistics companies’ big task is to answer the question ‘How should we reduce our logistics cost?’
Before jumping into answering it, one must acknowledge that the essential ingredient to logistics cost reduction is ‘Treat people well and profits will follow’. One must listen to its people, they do have great ideas.
Now, let’s take a look at all the things one should focus at –
- Use of Systems & Technology: An excellent Warehouse Management System (WMS) can help reduce costs. Other similar things like product slotting (having top demand SKUs near shipping), robotics, Transportation Management System (TMS), Warehouse Execution & Control System among others can aid in logistics cost reduction through automated, cost-effective transportation and warehousing.
- Labour Cost: Every project should focus on reducing labour costs. Various measures can be implemented for this purpose like adopting Labour Management Software systems, incentive programs for warehouse employees, and warehouse mobility. This will help in reducing overhead costs and will increase individual productivity.
- Safety: First and foremost, shippers and logistics providers should understand the safety considerations like ensuring safe warehouse operations and avoiding injuries. They must really be proactive with safety. They should have someone like a Safety Manager who can be accountable and responsible for safety and ongoing safety training.
- Preventive Maintenance: In cases such as equipment breakdowns and accidents, one would lose man hours, and maybe customers as well. It is important to note that preventive measures must be taken along with keeping a contingency plan.
- Suppliers: The best tip is to collaborate and partner with suppliers. They can help with working and creating a win-win cost reduction program. Although, keep in mind that never jeopardise quality whole reducing the costs of components.
- Customers: The happier the customers are, the lower can be the cost of logistics. By going beyond customers’ expectation, companies can spread the burden of logistics cost reduction over a greater number of orders/customers. That’s why customer service should be factored primarily.
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