Let’s examine how you may cut costs on logistics, either by lowering shipping expenses or cutting manufacturing times and lead periods, now that you know what logistics costs are and how to try to compensate for them.
1. Find a source closer to home
It’s a costly supply-chain operation. If you’re importing your items from China because they are less expensive than those produced in the United States, bear in mind how much shipping will set you back.
The ideal manufacturer for your firm may save you money on distribution, but it will be determined by the type of goods you offer, the materials required to produce them, the supplier’s past experience, and a variety of other factors.
2. Consolidate items to optimize purchasing and storage
Examine your product lines to see whether you may improve them. The larger your product catalog, the more costly it is to maintain and manage your stock.
Take a look at your sales data over time to get a better understanding before making any decisions. Make the following inquiries:
- What products are bringing in the most money? (e.g., what proportion of your SKUs account for 90% of your sales?)
- What is the best way to increase sales? Find out what items consistently sell for less than others. What products should be replenished more frequently, and which ones sell at a quicker rate?
- Are there any products that aren’t selling very well in a particular color or size?
- Is it typical for consumers to buy a given number of items together?
- What is the most popular thing in your store?
Identifying which SKUs are performing well can help you decide which ones you should retire because they aren’t selling (which might result in dead stock), where to direct your resources and invest more money in advertising, and even if you need to modify your ecommerce returns policy.
3. Review your carrier options
Carriers update their prices on a regular basis, so it’s worth considering whether you should reevaluate the costs of all of their services to see which alternatives are the most cost-effective for your company.
The cost of shipping goods from your warehouse to consumers is usually dependent on various factors, and it can have a significant influence on your overall logistics expenses. To calculate possible shipping costs, tally up the following carriers’ charges:
4. Buy bulk packaging
The cost of packing and shipping can seem insignificant at first, but it adds up over time. When you know your order weights and sizes, as well as the correct combination of boxes and/or poly mailers, you may save money by buying packaging and packing materials in quantity.
When you’re able to trim your average per-order cost, it will save you money in the long run.
5. Reorganize your operations
The worst excuse used in business is: “We’ve always done it that way. ” Review your logistics expenses, procedures, technology, and measurements on a regular basis to see if any adjustments are required.
Here are a few operational questions to get you started:
- Do you have a logical warehouse layout? Are you making the most of the area?
- Is there a pick list that’s tailored to the workers based on the inventory they’ve been using in recent orders?
- Are your packing stations being used to their full potential?
- Are your inventory records up to date and well-organized?
- Is your personnel effective and working with a low error rate?
- How much time does it take to complete each activity in the warehouse? Is this information available at the employee level?
- What is the typical time it takes for an order to be shipped after it’s placed?
- Have you missed any delivery deadlines?
Questions such as these may assist you in determining whether pallets, shelves, bins, or racks should be vertically or horizontally rearranged. Recruiting and training staff to be more efficient might help you save money. Improving processes that are costing you the most is also possible. Even changing your operations is feasible if necessary.