Transportation is a significant part of the entire supply chain, and every company strives to reduce its transportation costs to maximise the supply chain ROI.
Transportation logistics costs are rising for several reasons today – top reasons including the geo-political tensions caused due to the Russia-Ukraine crisis and capacity shortage caused due to global port congestion. The recurring pandemic outbreaks in China and the subsequent lockdown efforts have only exacerbated the increasing transportation costs.
Here are some of the pressures on global transportation logistics today that are causing an increase in the transportation costs:
- Rising fuel rates
- Labour shortage for commercial drivers
- Port congestion and delays
- International trade restrictions and regulations
- Increased customer expectations
Minimising the transportation cost has become a critical KPI for most supply chain managers, and rightly so! The hidden costs in transportation can eat away the profit margins of the supply chain ROI and ultimately affect the company’s bottom line. Therefore, even a more minor reduction in transportation costs can positively impact the company’s overall financial performance.
Here’s how you can reduce your logistics transportation costs:
- Go multimodal
If you have been sticking to only one mode of transportation, maybe it’s time to revisit that and go multimodal, as it would save a lot. For instance, let’s say your preferred mode of transportation is the sea as it is cheaper than air; you may also want to check if it is costing you your sales because of the time taken. The same applies to choosing rail over the truck as rail transport is comparatively cheaper.
Using a multimodal transportation strategy based on your business and your customers’ requirement can save a lot of transportation costs. If your customer needs only a part of your cargo to be sent urgently, you could expedite that using air and prefer cheaper modes for the rest of your shipment.
- Consolidate shipments
Consolidating shipments is a great way to bring down your transportation costs. Larger shipments usually have lower rates owing to the discounts provided by the carriers. Supply chain managers can make the best use of this and consolidate the shipments for different customers into one shipment. Using full truckload shipping (FTL) can help in saving more money as the trips become fewer.
- Leverage real-time visibility
Imagine tracking your shipment in real-time from the moment it leaves your door up until it reaches your customer. And add the factor of ‘customer delight’ to this scenario as you would be updating the shipment’s progress live to your customers. This is a double win. Not only will you be able to handle delays proactively and react faster to any disruptions, but you will also enhance your customer experience, which helps significantly in retention. Put together; this will be a considerable cost saving for your company.
In recent years, having real-time supply chain visibility has been a game-changer not only for global conglomerates but also for several smaller companies. Many smaller companies have also been leveraging real-time supply chain visibility for cutting costs in the immediate future and gaining a competitive advantage.
- Eliminate operational silos
A lack of workflow automation or operating in silos within the supply chain and other internal teams could incur unwanted costs. Well-timed communication and transparency in the supply chain go a long way in avoiding unnecessary logistics costs.
To stay on the right side of the customer and not ruin the credibility, you have to be prompt in the delivery schedules and proactively communicate the delays, if any. To minimise delays, it is crucial to collaborate with every stakeholder in the system on time. Automating the process of your shipment progress mapping can help eliminate the operational siloes within the company.
To reduce your transportation costs, what is required today is a smart combination of:
- Streamlining your internal logistics process through supply chain automation and eliminating costly manual activities for planning transportation.
- Leveraging analytics and data insights to cut transportation costs and identify cost savings opportunities for the future.
- Mitigating logistics risks and optimising the associated costs.
Feel free to reach out to us if you are looking to minimise your transportation logistics costs and automate your end-to-end logistics profitably.