Tips to reduce your logistics service costs
Published By: LogiPe on October 4, 2022
Running a logistics firm requires maintaining a careful balance of revenues and expenses. The sector has a narrow margin for profit and is highly competitive. Companies have to keep a constant eye on their competitors and the logistics costs in India to stay viable. At the same time, they must keep in touch with their customer's needs and the market situation to provide the most attractive service in their sector. Hence, there is a pressing need to pay close attention to the costs incurred in running the business. Knowing how to minimise these costs helps increase the company’s bottom line.
Factors that affect logistics costs
There is a multitude of factors that affect fleet management costs in India. Here we discuss the most prominent one.
Mode of transport
Depending on the type of cargo and distance, the logistics firm has to pick a mode, or multiple methods, of transport. They have to weigh opposing factors like time and transport charges in such a situation. Faster transport usually comes with higher charges. Further, faster transport can include more comprehensive storage steps, which adds to costs. For example, storing cargo during air transport costs significantly more than in the case of road transport.
The digital solutions currently available involve modern tools and methods like data analysis, artificial intelligence, machine learning and blockchain to provide the best possible service to logistics firms. They promise increased efficiency and help cut costs where needed, serving specific niches in the operation of logistics.
The importance of digitization of road logistics in India
For logistics companies that use their fleet, fuel costs form a significant part of the overall expenses. Fuel pricing can be very volatile, resulting even in day-to-day fluctuations. Inefficient route planning and driving practices can aggravate the burden of fuel expenses.
The labour market for logistics has a high turnover. Newer entrants are apprehensive of the increased workload and the low returns. The logistics companies must offer competitive packages to drivers and other logistics staff to ensure they stay committed. In addition, they have to invest in training new drivers to have adequate skills and avoid inefficient practices.
Packaging varies based on the category of goods in transit. More delicate and fragile goods need extensive, secure packaging. Without such packaging, the company could suffer losses due to transit damage. Choosing the right kind of packaging involves balancing safety and costs.
Larger vehicles can carry more cargo, increasing the earnings per trip. However, most companies start with small or medium-sized trucks. Expanding to larger ones involves increased initial investment as well as maintenance.
Warehousing and inventory management costs
Goods not on dispatch must be stored securely until they are ready to be dispatched. Storage takes up warehouse space, which is a cost of its own. Managing the inventory also involves costs, as the firm must hire labour to track stored individual units.
Government policy and compliance
Government mandates add an external source of pressure on logistics firms. They have to make sure they comply with local and international regulations, if applicable. Ensuring all paperwork, such as driver hours and truck conditions, are in order can lead to high logistics cost in India.
Tips to reduce logistics costs
As we have seen, many factors affect logistics costs, cutting into the profit margin. Here we discuss how to achieve cost reduction in logistics management, improve the company’s revenues and help it stay competitive.
Better route planning
Fuel and transport costs are a major portion of logistics expenses. Better, efficient route plans can cut down on wasteful expenses, leading to savings. This also maximises payout per trip, boosting productivity.
Use data insights
The modern logistics firm has a wealth of data to analyse from each of the many dispatches they run. This data provides them with a range of information regarding route productivity, driver behaviour, and shipment regularity. A fleet tracking system can help analyse this data and plan for the future. Payment tracking software, such as the one offered by LogiPe, can boost productivity, allowing the firm to tighten up on wasteful expenses.
Maintain customer satisfaction
Keeping customers satisfied helps boost brand image and increase the chances of gaining long-term customers. Any logistics firm knows that loyal, regular customers are a recurring source of income. Further, having frequent customers help plan routes more predictably, increasing the efficiency of the dispatch. This helps reduce logistics costs.
Another important tip is to encourage customers to have a minimum order value so that the amount covers the shipping costs too. Thus, the company can provide free shipping. Customers who value fast, free shipping are likely to be willing to buy in larger quantities if they are satisfied with the company’s service.
Automate processes wherever possible
Many processes in order fulfilment can be automated with the appropriate use of technology. Fleet management software, for example, can automate stages like billing, invoicing and collection. Using such software eliminates the need for manual labour, leading to cost reduction in logistics management.
Similarly, warehouse management software can automate inventory management, keeping track of goods in storage. Warehouse management software and warehouse robotics reduce the need for human labour. While the initial investment can be significant, in the long run, automation helps to cut down on excessive costs associated with manual labour during storage and warehousing.
Use a 3PL service provider
Another option is to outsource the logistics operations to a Third Party Logistics (3PL) service provider. Such service providers are highly competent and have in-depth logistics experience. Their connections and experienced personnel help them minimise costs and stay competitive. Hiring a 3PL service provider removes the need for the firm to worry about the various costs of order fulfilment, leading to significant savings for the logistics firm in the long run.
A logistics company must stay on top of various factors to make profitable returns. We have discussed some of these factors above and seen how the company can take steps to reduce unnecessary expenses. These savings can increase the company’s profitability, leading to growth potential. At LogiPe, we provide financial solutions that help you keep track of every expense of your logistics firm. With this perspective, you can take appropriate action to save in crucial areas.Visit our siteto learn more about what financial services we have to offer you!