With the increased demand from eCommerce driving alternative sourcing of materials and manufacturing, international supply chains have seen an increased push towards managing costs. While the attraction of low-cost materials and labor has manufacturers turning to the international market, rising fuel prices and port delays have vendors in every sector struggling to keep up with demand.
Supply chain logistics costs can account for anywhere from between five to 50 percent of a product’s total landed cost. For logistics providers looking to mitigate these costs without passing them on to the client, here are a few tips to help keep expenses in check.
1. Limit Transit Time Variability
For most clients, the ability to accurately gauge time-to-shelf has a big impact on their ordering habits. Receiving parties often compensate for uncertainty by building buffers of inventory, ordering more often, and ordering greater quantities than they need.
Yet while a typical air-freight shipment may take eight to 12 days, cargo is only actually in transit for five percent of the trip. Reducing delays where possible–even by paying more for premium shipping–can help create a more efficient flow of goods, leading to increased productivity and lower costs.
2. Consolidate Shipments
Why make more trips than needed? Combining goods from multiple suppliers for a single destination isn’t just a means of cutting expenses, it’s also one of the ways that “green freight” providers are reducing their carbon footprint, while improving on the service they provide to customers. By maximizing full container loads and combining container loads that are less than full, it’s possible to cut costs, reduce emissions and boost customer service.
3. Evaluate Insurance Costs–and Eliminate as Needed
While many clients may rely on Carrier’s Insurance to mitigate loss or damage to cargo, often a company’s insurance may already cover shipments of goods. Since Carrier’s Insurance can be expensive and reimbursement limited to only certain situations, take into account whether or not you really need it.
4. Factor in Non-tariff Trade Barriers
Non-tariff barriers to trade act as a means of policing potential human rights violations and boosting local economies. But these same tariffs can also lead to an increase in liabilities and compliance issues that can drive up the cost of doing business. Be aware of all local laws, regulations, policies, conditions, restrictions or specific requirements, as well as private sector business practices, or prohibitions in areas you do business.
5. Consider Alternative Methods of Shipping
There’s an old saying that goes, “to a hammer, everything looks like a nail”–which is to say, for a company that has invested in a fleet of trucks, trucking may seem like the ideal answer for all shipping needs. But always investigate alternative methods and look for potential savings. Get multiple quotes to determine what shipping method will best serve you.
6. Automate Compliance Processes
As one of the most important trends driving the growth of shipping and logistics, automation can streamline and reduce cycle times associated with manual tasks like document preparation, while helping to minimize the potential for human error. Border crossings and destination processing in particular, can be expedited through the automated generation and cataloging of required documentation like a bill of lading.
Reducing costs requires that an organization take a comprehensive look at the entire supply chain and identify areas prone to slow-downs and overspending–as well as to investigate alternative sourcing for carriers and materials. With a solid understanding of all the variables, cutting logistics costs will lead to increased efficiency and more profitable billing.
If you need a partner to help you strategically manage and successfully move your products out of the port and onto their final destination, be sure to download our latest eBook — Speeding Time-To-Shelf and Cutting Costs — a must read for today’s Logistics Managers.