How leading Organisations are reducing their Logistics Cost?

An organisations Logistics costs are largely comprised of freight forwarding, custom clearances, warehousing, distribution, and related IT costs. While all companies have multiple priorities on their plate, reducing logistics costs is a key one as it directly contributes to their bottom line. While most companies follow the strategy of managing logistics in-house to control their logistics costs, they often suffer due to high initial set-up costs, higher costs from service providers due to low economies of scale, and large bandwidth requirements to manage the operational issues on a day to day basis.

Several forward thinking companies have been outsourced their entire logistics operations to 3PL organisations; who provide incredible value through their staff of highly trained and experienced professional, improved rates due to their higher bargaining power, reduced overheads, efficient operations via established SOPs, and pay per use services.

logistics cost reduction strategies

Read on if you are keen to gain a significant advantage over your competitors by inculcating world class operational excellence into your business, and a significant dollar benefit to your bottom-line!

1. Invite bids

While 3PLs do help to reduce your overall logistics costs, it is important to ensure that you are benefiting from the most competitive rates in the market. Do invite bids from the key established 3PL providers in your region, benchmark prices and operational capabilities, and assess which 3PL provider will be the most strategic partner to your business. It would be advantageous for you to provide global overviews of your logistics plans whilst inviting bids for a specific activity, as this will encourage the 3PL to quote competitively so as to gain further business with your organisation.

2. Participate in multi-user warehouses

Capital investments involved in setting up a dedicated warehouse is massive, and the ROI takes several years. Besides the initial CapExs, managing a dedicated warehouse involves a recurring expense of tens of thousands of AED in terms of manpower costs, maintenance, running costs, etc. Then there is the challenge of finalising, and implement the most suitable IT systems for your warehouse operations.
Now consider partnering with a 3PL who has already invested in setting up state of the art warehouses with the latest technologies, has a staff of highly trained professional, has the technical expertise to provide your business cutting edge IT solutions, can commence business operations with you over a few weeks – and provides all of this at a nominal pay per use model!

3. Access to experienced professional workforce

Having experienced and trained professionals is what often differentiates a successful business from its competitors. These professionals who are key to managing a business’s operations often come at a significant cost may either be underutilized in an individual organisations, and hence a wasteful cost; or be simply unaffordable to small and medium sized businesses. Enter a 3PL provider who invests in a team of the best professionals for its clients, and suddenly your business gets access to the best talent in the market at a fraction of the cost. This gives businesses a great opportunity to run a world class operations, without having to spend on building a team of experts.

4. Initiate new projects at no additional costs

All companies have a constant pipeline of new ideas and projects which would contribute to growth, expansion, etc; but are unable to actively pursue as the existing team size doesn’t have sufficient bandwidth due to multiple internal priorities. At this point, a company could consider outsourcing the project to their 3PL partner who will be happy to deploy their substantial resources at a nominal cost, or at times without any cost; if they receive reasonable assurances from the company that the extent of their partnership can grow. This strategy will help senior management to get multiple projects on the ground at low costs, while they focus on business itself.

5. Single relationship, peace of mind

Managing your logistics operations flawlessly is similar to a juggler who has multiple balls in the air – one must not only manage vendors for transportation, freight forwarding, customs clearance, and warehousing, but ensure that each of these vendors are in sync with the other. This often requires a company to hire a big team, as well as have some churn in it’s vendors who may not work well with each other for various reasons. Besides substantial effort, this also increases an organisations costs. On the other hand, an established 3PL provider will deliver you immense value by providing a seamless single window experience, where all the multiple service providers are integrated under it’s umbrella.

3PL organisations provide your business with ready to move into operations, plug & play solutions, professional staff, access to the latest IT tools & technologies – all at very competitive costs, and high service levels. Organisations free up a huge amount of time which can be invested in developing their core business. The enormous cost benefits generated can be passed on in part to their customers who will reward them via their repeated business, as well as enjoyed as incremental profits. Companies can also depend on the 3PL organisations to work collaboratively with them as partners who will proactively pass on new technologies, best practices, etc.

In summary, we believe that outsourcing your logistics operations to a leading 3PL company can be one of the best ways for your business to kick off 2018!!

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