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10 ways can SMEs Cut Costs on Logistics and Increase the Profit Margins

Overview:

Manufacturing and services companies require good logistics to transfer their products to customers on a timely basis. In modern terms, logistics basically refers to the study of flow of people, information, goods and other resources in an organization, thus providing an in-depth analysis of how the right items can be prepared and supplied at the right place, at the right time. Therefore, even if your business does not involve manufacturing, it can still benefit from well-organized logistics which helps lower customer waiting time, manage the business effectively and improve efficiency.

Efficient logistics and supply chain management help SMEs maintain lower costs and stay competitive in the market. However, the challenge lies in the fact that different logistics companies quote different prices for operations and procurement. It includes hidden costs, non-standardized quotes from vendors, lack of shipment updates and accurate tracking etc. This results in delay of shipment, thus causing loss of sales due to delayed deliveries. Therefore, it becomes very important to reduce logistics costs and optimize operational efficiency. So, let us look at some of the ways in which SMEs can cut their logistics costs and gain maximum benefits:

#1. Consolidation:

Although it is good to ship products in Full Container Loads (FCL) in order to reduce transportation costs, at times when you have smaller consignments, it is always better to consolidate shipments, to lower the logistics costs. You can simply combine your Load with other suppliers who share the same destination, therefore making it a cost-effective solution.

#2. Standardized and All-Inclusive Rates:

The rates quoted by freight forwarders vary greatly, which further include variable costs and hidden charges. This requires businesses to follow a tedious process involving comparisons and calculation of shipment costs across different logistics partners. Therefore, SMEs can take assistance from online logistics marketplaces that provide clear, standardized and trouble-free online quotes. They eliminate hidden costs and give an all-inclusive freight rate, thus saving your time and effort to a large extent. These online marketplaces also provide simplified, data-driven processes and exclusive-window dashboards with technology optimization, thus favoring management of multiple orders in an efficient way.

#3. Cargo Insurance:

Insuring your cargo is an important part of the entire process in order to avoid any losses arising from unex paced events during transportation. Unless cargo insurance is taken care of, effective cost-saving strategies and logistics planning would not prove helpful.

#4. Forecasting:

SMEs must allot sometime for forecasting shipment costs and other details with the help of past shipment history such as frequent destinations, average quantity of shipments, frequently used freight forwarders, type of material, average shipment costs, average delivery time and preferred means of transport. If not, it can result in increase of costs due to discrepancies in the quoted and final invoice rates. In order to avoid this, online logistics marketplaces offer a data-driven approach that help SMEs eliminate variability and have customized costs, with very little or zero hidden charges.

#5. Outsourcing:

It is usually a good practice to outsource part of your supply chain operations (especially storage and transportation) to skilled professionals. It helps lower your costs and improve work efficiency. In order to have a smooth outsourcing process and minimise costs, it is best if the logistics partner and the business agree upon important issues like product handling, freight size and frequency, temperature control and packaging specifics etc.

#6. Optimized Resource Usage:

SMEs can improve business efficiency by optimising the use of resources and assets, including inventory, fleet vehicles, status of assets etc. Efficiently managing and rearranging delivery schedules help a great deal in optimising fleet usage by keeping them active at all times during the day. Also, owning a large warehouse that remains under-utilized during most part of the year can prove disadvantageous. Instead, companies can avail additional warehouse space on rent as and when the business experiences high peaks, therefore avoiding unnecessary expenses.

#7. Shipping Updates:

Delays in shipping are something that can cause revenue losses and extra costs due to penalties. This can impact businesses greatly and prove expensive. Therefore, tracking shipment updates on a timely basis becomes very important. But due to improper organisation, most freight forwarders fail to provide regular shipment updates to the client. Online logistics marketplaces offer regular, automated shipment updates along with the status of shipment and estimated delivery time, thus addressing this issue.

#8. Supply Chain Visibility:

Good supply chain visibility helps businesses maintain and manage their product stock, thus reducing the risk of going out of stock. It ensures quality service and fights uncertainties arising in the demand and supply process. Automated dashboards help in tracking data regularly and maintaining business efficiency, with effective cost control and reducing the need to maintain large safety stocks.

#9. Contract Rates:

When there are multiple and frequent logistics requirements, calculating rates and finalizing vendors each time becomes highly time consuming and expensive. To avoid such situations, it is best for SMEs to fix contract rates with specific vendors for a selected period of time. Online logistics marketplaces can assist in this process and help businesses maintain good vendor partnership, while lowering unnecessary costs.

#10. Timely Planning:

Planning product delivery, production schedule, transit time (taking into account national/international holidays as well) and shipping routes plays a vital role in maintaining good business. Unplanned and last-minute decisions can be risky as it can cause delays in delivery and affect the company’s finance and image.

Conclusion: In order to maintain business and grow in the ever-competitive market, SMEs must focus on optimising their time and resources with the help of efficient logistics planning. Online logistics marketplaces help in simplifying and streamlining this process with the use of latest technologies and time-saving methods, thus cutting your overall expenses, boosting revenue and enhancing customer satisfaction.

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