If you're experiencing problems with increasing logistics spend, you can curb the issue by identifying where you're losing money and moving to address the underlying causes.
Key takeaways
Logistics expenses can cut into your organization’s bottom line
Constantly monitoring the supply chain is essential
Technology and advisory assistance can help identify overlooked expenses
Businesses all over the country are running on razor-thin margins, and anything that adds to expenses could significantly hinder the company's outlook. Logistics is one area where organizations are experiencing budget issues, as additional costs make turning a profit more challenging.
Luckily, many of these logistics budget issues are entirely repairable, particularly if you have the assistance of state-of-the-art technology and expert advisors.
Here's a look at five common logistics budget issues you could experience, along with information on what you can do to rectify the situation moving forward.
1. Carrier mistakes
In many cases, errors your shipping vendors make could lead to extra costs on your end. You might not even notice these problems for months, allowing the expenses to pile up and cost you even more.
Since these costs are often the result of human error, there isn't anything systematic that you can do to catch them. Instead, you'll have to review your invoices and other information to see where you're experiencing losses.
However, it's important to note that a transportation management system can help you track each shipment in real-time, adding supply chain visibility and allowing you to spot any abnormalities. There is also help available through third-party logistics advisors, which can audit your carriers and assist with any claims you need to make when they don't meet your contract terms.
2. Poor vendor contracts
Speaking of vendors, your contracts could be costing you more money than necessary. Even if your shipping vendors aren't making significant mistakes or generating delays, they could cause logistics budget issues if you end up with poorly negotiated agreements.
Businesses commonly end up with less desirable deals when they first start trying to handle their own logistics. These companies might not know how to negotiate or be aware of how benchmarking data could improve their positions.
Luckily, as your company becomes more established, you'll develop more leverage in these negotiations and can use it to gain more favorable terms. A logistics advisory firm can also analyze your contracts and provide advice, assisting as you reduce your logistics costs.
3. Routing issues
A lot goes into transportation costs, including fuel, truck space, and employee wages. The longer your deliveries take, the more surcharges you can expect along the way. Routing issues can lead to idling trucks, partial loads, and extra stops before shipments reach their destinations. Your organization will end up paying for these expenses.
Optimizing your shipping routes is essential because you can cut down on much of your transportation waste. Reliable routing can also help you avoid traffic congestion and poor weather that could cause significant delays and slow down your entire supply chain.
Transportation management solutions are a great way to track your shipments as they travel. Advanced supply chain analytics can also assist by looking at your current costs and providing insight into how you can save money moving forward.
4. Misusing back-office resources
Most companies have finite back-office logistics resources, so ensuring that you're using them efficiently is vital to improve timelines and prevent burnout. If you have a single employee handling multiple jobs or overseeing the entire logistics chain, you're sure to run into problems as you grow.
The good news is that help is available, both through third-party advisors and transportation management solutions. These options automate many of the jobs your back-office staff is currently handling. The result is less pressure on these employees while reducing your logistics expenses.
5. Inventory mismanagement
The longer it takes to move inventory, the more it will cost your organization. When products are sitting in a warehouse, there are daily storage fees associated with them. Empty shelves in a store also cost your business because you can't sell a product that isn't there.
Effective inventory management makes it more likely that your products will get to where they need to go at the right time. This process involves keeping hot ticket items moving through the supply chain while avoiding situations where you have too much of a product that isn't selling.
Inventory management is another situation where analytics can help, as they help you forecast future conditions and optimize your supply chain. The result is that your money-making products will be consistently on the move.
A way to solve your logistics budget problems
As you can see, many problems can throw your logistics budget off-balance, adding expenses to your bottom line and making it more challenging to turn a profit. However, collecting and analyzing logistics data, using a global transportation management solution, and renegotiating your carrier contracts can significantly improve your budget issues.
Resource Logistics Group is a third-party logistics advisor that will provide the data to lower your logistics costs and assist with a transportation management solution that meets your needs. Our team can help with any supply chain problems you encounter while ensuring you stay in control of the entire process. Contact us for a free benchmarking analysis of your carrier pricing and contract language.supply chain visibility