5 ways to improve your logistics processes and reduce transportation costs

Successful logistics management is not just a necessity; it’s a strategic advantage. It’s the key to keeping customers satisfied and controlling costs. When done well, it ensures timely delivery of the right products, leading to better operational efficiency, lower costs, and increased profitability. Here are five simple tips to improve logistics processes and reduce transport costs, helping you unlock these benefits.

1. Optimising route planning

Sending your vehicles on efficient routes is crucial for reducing costs and providing good service. 

Let’s talk about costs first. Transport costs are usually divided into fixed (per vehicle) and variable (per mile). Fixed costs are the expenses that must be paid daily, whether the vehicle is in motion or not. This typically includes taxes, insurance, staff costs, depreciation, and personnel costs. Variable costs are incurred only when the vehicle is used, including fuel, repairs, maintenance, and tyres. By optimising vehicle routes, you can reduce the number of miles driven and require fewer vehicles.

Route optimisation finds the shortest and fastest way to reach your destination for your delivery vehicles. It’s evident how an optimised route can improve efficiency, but how does it enhance customer service? Numerous route optimisation tools are available for purchase. Most of these tools allow users to set delivery parameters such as time windows and access requirements. These tools can test millions of combinations to select the most efficient route while considering these parameters. This ensures that your customers receive their requested products within the specified time window and on an appropriate vehicle; however, do not be afraid to limit the constraints imposed by your customers (for example, give a minimum window of four hours) as too many parameters can make the job much more complex and increase costs.

2. Implementing load consolidation

Vehicles are costly and must generate substantial returns. Charging customers based on delivery quantity is a straightforward way to cover expenses, but setting a competitive price while ensuring profitability is crucial. Viewing your operation in terms of cost per unit delivered makes maximising capacity and achieving economies of scale through load consolidation a logical approach.

Various strategies can be implemented, centring around transporting items to the same location at similar times. Milk-run deliveries are typical for retail operations with consistent volumes and known delivery windows. They involve a single vehicle making multiple stops to drop off or pick up goods and maintaining a fully loaded vehicle throughout the journey.

Hub-and-spoke models are also effective, centralising all products at one location, consolidating loads, and distributing them. Successful load consolidation depends on collaboration and coordination between you, suppliers, and customers. Collaborating with other businesses to share resources in low-volume areas and utilising logistics management technology such as inventory management tools, route optimisers, and warehouse management systems is essential. Additionally, working with suppliers and customers to establish clear order cut-offs and flexible scheduling is crucial for consolidation. Maintaining effective communication and clearly defined responsibilities with all parties involved is vital.

3. Leveraging technology 

It is widely known that machines excel at tasks that humans may struggle with. For instance, while humans can distinguish between different pictures of dogs, computers can rapidly recall pi to thousands of decimal places. In practical terms, this means that you should stick to what you’re good at and ‘outsource’ some jobs to the latest technologies. For instance, transport management systems integrated with route optimisers can efficiently plan routes, manage loads, assign them to vehicles, gather proof of delivery, and generate invoices with minimal human involvement. Vehicle telematics systems monitor the location and status of vehicles as well as the behaviour of the driver, allowing you to reward good drivers, identify maintenance issues and keep your customers informed.

When you employ technology, you free up the people of your operation to do what is important to your business: serving customers and being efficient. 

4. Partnering with reliable carriers

Collaborating with other businesses to consolidate loads in low-volume regions makes a lot of sense. However, what if you need a strategic partner, such as a parcel carrier or haulier, that serves the entire network? As we’ve discussed before, a happy customer is a loyal customer, and a carrier that lets you down does not contribute to customer satisfaction. Therefore, it is crucial to have a reliable partner; otherwise, you will end up paying for their mistakes. 

Selecting a carrier is critical to success; you should run a competitive tender process, inviting responses from multiple different carriers to understand the services available and the likely costs. During that process you should look for a partner with experience and expertise in your sector, check their references and understand their pricing structure. You should lay out your expectations clearly as this will start the process of building a solid and productive working relationship.

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5. Monitoring & analysing logistics performance

Things that are measured can be improved. If you want to see improvements in your logistics operation, having processes and procedures which monitor and address poor performance is crucial. This will help you identify areas for improvement and ultimately lower costs while improving service quality. Key Performance Indicators (KPIs) play a critical role in understanding your operation – they can be categorised by area and include metrics such as cost per parcel delivered, cost per KM, ‘On-Time-In-Full’ (OTIF), load fill, and customer satisfaction scores. When implementing KPIs, it’s advisable to measure everything without judgement until a clear pattern starts to emerge, this is your performance baseline. After this period, focus on improving two or three KPIs at a time, considering the root causes of issues, and regularly discussing all KPIs with your team and/or service partner.

Successfully improving your logistics management processes

Various strategies can be employed to enhance your logistics performance and reduce your costs. The basic principles are the same: less is more—less wastage by route optimisation and monitoring the appropriate KPIs, more customers serviced by load consolidation, and partnering with the best carrier for your business. These tips can be applied to any operation in any industry to help reduce your costs and improve your customer service.

To find out how to improve your logistics management processes, contact us today and speak to one of our consultants about your business requirements.