8 Tips for Creating a Better Logistics Budget 11.20.23

Is transportation spending eating up your budget? Here are 8 steps to building a better logistics budget for your next fiscal year.

Logistics spending is on the rise. In fact, in the United States alone, total GDP spend on logistics increased by $114 billion in just a year. If your logistics budget is ballooning, you are not alone. In an increasingly online world, logistics is a crucial part of every business and must account for a large percentage of a budget. 

That being said, it is still possible to get the desired ROI from your logistics spend while trimming unnecessary expenses and embracing innovative solutions that will make your dollar go further. Whether you have already begun planning the next fiscal year’s budget or are looking for a fresh approach when the time comes, these eight strategies will help you demystify the process. Below, we will tap into some trusted tips for creating a better logistics budget, no matter what industry your business is in. 

Strategies covered in this article include:

• Identify logistics goals and challenges

• Time for an internal audit

• Timing of your budget planning

• Budget for the unexpected

• Look for opportunities to automate

• Practice inventory reduction

• Look at your IT spend

• Find hidden surcharges

1. Identify logistics goals and challenges

Before planning your budget, look at the state of logistics within your business: 

• How important is logistics to your organization? 

• Has the role of logistics changed in any way? 

• Where are you shipping to most frequently? 

• What are your pain points? 

Take note of clients that fail to pay, inventory theft and increased rates. Study freight scheduling, customer demand cycles and any repeated issues with international shipping compliance.

2. Time for an internal audit

When you plan your budget, you should also revisit supply-chain contracts. Assess the current rates outside of your current relationship and look at how your logistics provider will scale to meet your needs in the coming year. Review penalties and incentives in the contract and keep an eye out for services you are paying for but do not historically use. 

3. When to plan your logistics budget

It is not just about how you plan your budget, but when you plan your budget. Ideally, you should balance your logistics budget towards the end — but not at the end — of your current fiscal year. Plan on spending the last two months of the fiscal year outlining and solidifying the next year’s budget. 

You should negotiate rates that will be locked in for 12 months so you can accurately forecast spending. This will also allow you to better plan sales prices in your inventory. 

4. Budget for the unexpected

Every logistics budget should account for events that cannot be predicted. Whether it is lost or damaged inventory, a mishap with a client, a decrease in business, or, in the case of 2020, a global pandemic, your budget should be padded with bumper funds to ease the burden of unforeseen circumstances.

5. Look for opportunities to automate

If your logistics budget is growing, you might be able to keep it in check by prioritizing automation. Partner with companies that share this vision and look for opportunities in your own organization to rely on technology. Automation lowers labor costs, improves safety, increases productivity, and provides more consistent quality control — all of which also save money.

6. Practice inventory reduction

When it comes to logistics, space is money. If you have excess inventory, your logistics spend will be inflated. Practice inventory reduction — also known as demand-given logistics — to free up space. By implementing this when you plan your budget, your next fiscal year will be stronger. 

7. Look at your IT spend

In the modern logistics landscape, IT and transportation are more intertwined than ever. IT is a big part of your logistics operation, and many businesses fail to factor this in when planning a budget. Think of upgrades in software that you plan to make and shifts in technology that require new hardware. You may be able to shift some IT budget into your logistics budget and vice versa.

8. Find hidden surcharges

Are you missing hidden fees? These could include fuel surcharges, import/export fees, and items in your contract that seem like great deals but perhaps are not being utilized to create profit. 

For fuel surcharges, ask your logistics provider to calculate these as far into the fiscal year as possible. Many will only calculate them per quarter — use this information to create an educated budget but allow room for some minor flexibility.

If you need help planning your logistics budget for the next fiscal year, Resource Logistics Group can take a bite out of your spending. We are shipping advocates who believe in empowering business owners to make informed, independent decisions with a little help from our team of experts. Please contact Resource Logistics Group to find out more.