Logistics spending in America has risen more than 11% in the last year. This guide will help your shipping department make every penny count.
When the Council of Supply Chain Management Professionals (CSCMP) released its 30th Annual State of Logistics report back in June, it came as no surprise to those of us in the industry that logistics expenses were on the rise.
The report revealed that American businesses spent $1.6 trillion on logistics and transportation costs in 2018 due in large part to an increase in online sales and higher wages for logistics workers. Fleet Owner magazine broke the report down for those without a CSCMP membership.
The third-party logistics (3PL) market alone is now worth over $194 billion after a decade of averaging 3% year-on-year growth. With such huge sums at stake, it pays for logistics departments to use every cost-saving technique at their disposal. In this article, we’ll discuss those methods by highlighting:
How to maximize logistics space
The right way to use RFPs and RFQs to find more efficient shipping partners
Considering consortiums to leverage savings
The importance of automation in streamlining expenses
1. Make the most of logistics space
Transit time, security and safety of goods, and the logistics costs of the carriers themselves all factor into your business’ final bill. Making the right decision here can significantly reduce freight costs by giving shippers more control over multiple metrics.
The more space-savvy choice will depend on different factors, like product type, timescales and the current budget. The two main options by land are FTL and LTL — Full-Truck-Load shipping and Less-Than-Truckload shipping. We went in-depth on these in our two previous blogs where we examined savings via FTL and offered a 101 lesson on LTL.
Don’t forget logistics costs via air and sea. It’s true that ships are miles ahead of planes when it comes to storage capacity, but there may be additional costs next year for ocean shipping because the IMO 2020 Sulfur Regulation will require ocean shippers to invest in new hardware and low-sulfur fuels — and levy heavy fines on those who don’t.
Logistics providers who do comply with the IMO will find it expensive — a cost that will likely be passed along to businesses looking for space on their ships. It will literally pay for logistics managers to keep their eyes on these pricing shifts and decide if the space is worth the money.
2. Master RFPs and RFQs
Request for Proposals (RFPs) and Request for Quotations (RFQs) are similar but different, and both offer potential savings. The RFP is the more intricate of the two, and properly executing it can net businesses good logistics partners right out of the gate or help identify when it’s time to change an existing one.
RFPs make your logistics needs known to multiple providers, who are then able to compete to win your contract. Competition between providers means a good deal for shippers who know what to look for and how to leverage that competitive pressure. This can save your logistics department money in two ways.
First, you’ll benefit from finding the most cost-effective carrier for your current needs. Second, the situation could evolve into a positive and ongoing carrier relationship, and those often lead to even more long-term savings. Check out our blogs on successful RFPs and structuring RFQs to help your business prepare and save.
3. Join (or create) a consortium
Bulk buying always comes with a discount. Many businesses join or create their own consortium or Group Purchasing Organization (GPO) with their suppliers to leverage savings on everything from fuel costs and vehicle expenses to technology and office supplies. Consortiums can also be effective ways to deepen logistic chain bonds, build relationships and create trust between all parties.
GPOs come in various forms, such as industry-specific GPOs where every member is in the same sector (also known as a vertical group), or the members may come from different sectors with a similar need (horizontal groups). Members are able to use collective bargaining to get more favorable terms, conditions and prices. The benefits can be significant, so your business should consider how to join or form a consortium.
4. How automated are you and your logistics partners?
Minimizing manual processes can save a lot of money. Technology allows shippers to streamline operations, reduce staff, and respond more quickly and competitively to customer demands. When your business upgrades and also uses a well-automated logistics partner, that doubles the savings for all concerned.
Today, cloud-based technology solutions are so ubiquitous that even the smallest business can find a competitive package and upgrade to automated processes. The customer demand for transparency at every stage of the logistics journey is only growing as e-commerce booms. Technology empowers logistics departments with analytics to provide that data, satisfy their customers and boost their bottom lines.
For example, the Resource Logistics Group’s global TMS platform (an option praised in a recent white paper from Logistics Management magazine) keeps your business and its customers connected to real-time shipping management, but we go beyond just tech solutions. We design all our services to not only optimize your logistical spend but make the day to day running of your business easier.
The number one tip to remember is that your business is a unique operation with needs likely to change over time. Reach us at the link below and let’s talk more about the present and future solutions.
Resource Logistics Group provides transportation and logistics advice combined with professional services and state-of-the-art technology. From contract negotiations to easing back-office burdens, we’re your ally in excellence. Connect with us on our contact page for a free benchmarking analysis.