The role of logistics managers in all business sectors is to optimize productivity and ensure customer satisfaction. Faced with such responsibilities, perfectly controlling logistical costs is becoming a priority. This is the total amount of expenses generated by the various activities related to the transport of goods. Of course, in order to get there, you need to study all the essential questions on the subject. First, find out the elements of logistical cost, the various types and the causes. Next, we'll tell you in a few lines how these expenses are measured and what to do to reduce them.
The operations that goods go through from their acquisition to the time they are distributed each have a price. All the costs involved in managing each flow are what make up the logistical expense. It is mainly about benefits such as:
In addition, in order to guarantee the smooth running of all these procedures, it is also necessary to remember to hire a complete and qualified staff. Labor costs therefore add up to logistics costs.
Indeed, logistical expenses come in various forms. However, we can find points in common between them and classify them into two main distinct categories. First of all, let's mention transport costs. These are the costs associated with the flow of goods from the point of origin of the goods to their final destination. Therefore, they generally make up the majority of disbursements. The sum of these costs is in particular governed by the means of transport that the company chooses. This, for the reason that it defines other important points such as the delivery time.Second, we can talk about operational costs or costs warehousing. These costs are of course linked to logistics facilities and everything related to the storage of goods. For example, they include the following:
Sometimes the logistical cost increases. This can happen for various reasons and at different stages of the supply chain: storage, transport, sales, etc. First, we can see an increase in expenses when there is A flaw in the implementation of the delivery system. This can lead to increased transport costs. Second, value chain operators also contribute to this increase. When they become less productive, it can also have a major impact on expenses. This, by increasing operating costs. In addition, it is also possible that the logistical cost will increase in the event of a Inoperative production. For example, if you deliver goods in a vehicle that is not full. Finally, neglecting maintenance the equipment you have can also damage your logistical expenses. In the event that your delivery trucks break down, for example, this will either delay distribution or force you to find an alternative.
Logistic expenses are calculated using specific indices. We call them the logistical indicators. Thanks to them, it is possible to determine the objectives of the logistics process and the impacts they generate. At the same time, they will also facilitate calculations, making it possible to see if the objectives have been achieved or if there have been inaccuracies. So what are these indicators used in the evaluation of logistics costs?
Transportation is the most expensive part of the supply chain. It is then normal if it is also given great importance in calculating costs. On this side, you should focus on the comparative transport index, but also on the level of use of transport vehicles.
Logistic expenses are calculated here according to parameters related to procurement. For example, this is the quality of orders, the deliveries received or the level of compliance of suppliers.
Storage is also one of the essential elements in the supply chain. Here we count the costs associated with unit storage, shipping, storage installation...
Of course, financial data also has an impact on the calculation of logistics costs. As far as they are concerned, they are measured in particular by:
The degree of compliance with customers, invoicing, credit notes... These are also indicators to take into account when you want to measure logistics expenses.
It is important and mandatory to carry out an inventory to know and correct inventory discrepancies. In this part, we refer to asset turnover indices, their duration index and also the accuracy of the inventory.
When a business finds itself in a situation where the logistical cost becomes too great, logistics managers are required to find a solution to minimize it. Of course, even if your organization is not in this situation, you still have a lot to gain by reducing disbursements. Fortunately, there are several ways you can put in place to optimize your logistics expenses.
You can optimize your supply chain by opting for the use of more technologically advanced means. Moreover, nowadays, professionals have tools such as software that allow them to manage everything more effectively and to personalize transport patterns. These include TMS or Transport Management Systems, which virtually assist you in all procedures related to deliveries. These instruments automate almost every task. They offer more precision in calculations, facilitate the organization of the various flows in the supply chain and make it easier to correct certain points.
In France, the weight of goods counts enormously in invoicing in general. Reducing the weight of goods therefore contributes to the reduction of transport costs. This is a practical solution in view of the constant increase in provider rates. To do this, you can, for example, play on the nature and weight of the packages.In addition, if we talk about the international market, it is mainly a question of dimensional weight. In this case, the solution to limit logistical costs is to optimize the volume of your products. Smart solutions would be to design medium formats or even use custom containers. Of course, tests are always required before validating these changes.
Packaging that is half empty or not completely full can quickly be a big waste. You need to make sure that all packages are as full as possible. Apply this to your boxes, envelopes or packages. You can also use this idea and fill the means of transport to the fullest. This option will help you better control your logistical expenses. At the same time, this will allow you to limit the return trips for the transport of your packages. To conclude, all these elements can increase logistics costs. However, if you use them the right way, they can also be used to reduce expenses.
Also discover: 5 actions to easily reduce your packaging costs
Indeed, you must keep an eye on the transport side to reduce logistical costs as much as possible. In this case, it may be necessary to carry out regular checks and even changes depending on the circumstances. To start, consider reevaluating your former providers by asking yourself questions about:
In the event that your deductions are more negative than positive, do not hesitate to look for a new carrier. In choosing your service provider, also remember to check its reputation and the quality of its services. You can carry out a study on a particular area. Of course, it is also essential to see the price aspect and to ensure a balance with the quality of the service.
Logistics is an essential part of any business. Its optimization therefore makes it possible to reduce numerous costs. Using an external service provider is a solution that can greatly help in this optimization in addition to saving you time to devote to your core business. To do this, it is essential to choose the right partner. Make sure you target the provider that will meet your needs thanks to this guide.
