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Top 5 Ways to Optimize Your Logistic Operations
Alexia Smith
Published on:
August 30, 2018
Updated on:
August 23, 2024
Published on:
August 30, 2018
Updated on:
August 23, 2024
A lack of good management can prove to be a burden for a company’s bottom line, leaving unhappy customers and employees in its wake. Logistics professionals should view their roles as customer-facing and continually add value.
Having a logistics strategy can help you make informed decisions, increase error-response time, and be more flexible in the process when it comes to unforeseen changes — saving you up to 40% on logistics costs. As difficult as it may seem to choose the best practices for logistics management, here are the top five ways companies can optimize routes.
Shipping companies usually engage in a practice known as ‘freight paid,’ in which suppliers pay for transportation costs. Switching to ‘freight collect,’ despite the consignee paying for the freight, comes with more advantages. It’s important to remember that the company which pays for shipment will not necessarily be responsible for transporting as well.
Increased control over inbound freight rids shipping companies of the extra 4 – 7% they would have to pay for the product, instead of hidden transportation charges. And can help them save up to 58% on freight expenses.
This control over inbound logistics allows for route optimization, as extra stops at supplier distribution centers can be cut out. Inbound processes then become more transparent, and inefficiencies are more easily identified.
Technology has advanced to a point where routing is now dynamic and three-dimensional. Many software options offer real-time routing solutions. They factor in the changing weather and road conditions so that optimal routes are found in terms of cost and time.
Technology can keep the transport planning process centralized even though it is spread over separate roles and functions. Routing software uses key point indicators — such as cost/efficiency, on-time delivery, and revenue/margin — to make informed decisions on quality.
Route optimization lowers fuel costs and wear and tear. Drivers can also benefit from these systems, as efficient routing reduces accidents and violations that can, in turn, impact insurance premiums as well.
Creative carrier programs have been launched in favor of reducing costs while also increasing customer satisfaction. Companies can use pool distribution for the same geographic regions. Shipments are combined in one load and transferred to a set point from where the orders are dispatched individually.
This is achieved by defining territories through set criteria. Handling costs do not drastically change as pool point costs are substituted. However, cost reduction opportunities are created as one bill and are made in the initial step of outbound shipments. This also helps free up drivers and reduces delivery mistakes as the task is broken down due to pool distribution.
A transport management system holds many benefits for logistics operations. Due to its advanced technology, the implementation of an appropriate TMS can drive down transportation costs by 40%. The right TMS can prove to be invaluable by analyzing records for outbound and inbound freight, carrier and vendor performance, and by creating freight visibility.
To choose the correct TMS for your logistics company it is important to consider these 6 features: carrier contract management, parcel shipping support, item visibility, business intelligence, back-office duties, and scalability.
It is most important to remember that while software helps streamline processes, it is not possible to implement efficiency unless employees are happy.
Taking feedback from your drivers can be your greatest asset as they provide visibility into on-the-job problems and their possible solutions. Assess your company’s operations and workforce to find the best transport management system to help you cut costs while keeping your stakeholders satisfied.
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