10 Tips For Reducing Supply Chain Logistics Costs As companies continue to manufacture and source materials from overseas

, controlling costs remains a top priority for those involved in international trade. One key factor that should be monitored more closely is logistics management, which covers all activities relating to the procurement, transport, transshipment and storage of goods. Depending on the industry sector, supply chain logistics costs account from 5% to 50% of a product’s total landed cost. Some issues effecting logistics costs: Fuel prices remain high and ports continue to experience delays, resulting in higher transportation fees. Increasingly complex international trade laws and security measurements threaten to lengthen delivery times and increase warehousing costs. According to a recent report by TechnologyEvaluation.com, a typical airfreight shipment takes eight to twelve days. Of this, the cargo is en route only 5% of the time. The rest is spent sitting in warehouses waiting for the required documents and compliance checks. Following are 10 Tips on Reducing Supply Chain Logistics Costs: 1. Understand the true costs of sourcing overseas. Calculate freight, duty, brokerage, and inventory carrying costs to support these lengthened supply chains. Also factor in such items as the costs of engineers flying overseas. Once you understand the true total landed cost and total impact to the business, that domestic buy may look a lot better. Sourcing from Ohio to your U.S. plant, distribution center or customer may, in the long run, be more cost effective than sourcing from China. 2. Focus on eliminating the variability out of transit times. The more variable the transit times are, the more likely it is that the receiving party is using more premium freight, building buffers of inventory, or ordering more often and more quantity than necessary to compensate for the uncertainty. Understanding these dynamics can lead to the conclusion that paying higher freight costs to insure higher variability actually saves your company in total costs. 3. Tariff engineering. Strategically source and manufacture products to take advantage of classification duty rates and eligibility for special trade programs such as NAFTA. 4. Consolidate. If you have multiple suppliers in one country, consolidate their goods into one shipment. In addition, if you always have LCL (less

it will have an entire shipment sent on an express/expedited (highest cost) service level basis. Informed decision-making. People generally want to be good corporate citizens and will select the less expensive option that still meets their needs. Which is cheapest? In general. 7. always try to get three quotes for movements. Often when a company has a shipment of premium goods they tend to use the Carrier’s Insurance. 10. Sometimes insurance doesn’t pay. 5. 8. and eliminate the associated errors.than container load) shipments out of one country. 9. resulting in ontime delivery. If the company is self insured. Be aware of non-tariff trade barriers. then they do not need to add the extra cost of Carrier’s Insurance. and the true cost of carrying inventory so they can make informed decisions. adequate inventory levels. Companies need to be more aware of the increasing level of non-tariff trade barriers that are in force to reduce sweat shop labor and support human rights and animal welfare . they should check their insurance policy to see if it covers shipment of goods. increased customer satisfaction. You may be able to partner and consolidate to a more cost-effective FCL (full container load) shipment. and the avoidance of fines. Companies that implement software solutions to automate trade compliance are able to speed the cycle times associated with tasks being performed manually. trains and automobiles. If it does. while the balance of the shipment can be sent using a standard (lower cost) service level. No matter the mode of delivery. try to find another LCL importer of goods from that country. Automated compliance procedures also bring fewer delays at border crossings. Automate compliance processes. Planes. the reliability of each lane for each service level. Control your express shipping costs. which most companies are. Water is cheaper than air shipment. Provide to the decision-makers/customers of your logistics network the cost of freight for each service level. rail is more cost-effective than trucking or air. Panicking often results in higher costs. Typically when a company runs into a supply chain issue. 6. Carriers Insurance is very expensive. such as document preparation. If the company would just do a little bit of calculating it can determine the amount of goods that are needed immediately and have that amount sent using express/expedited service level.

Logistics is considered to have originated in the military's need to supply themselves with arms. Roman and Byzantine empires. rationality. transportation. maintaining and transporting materiel. to IT materials. language. material handling. meaning "speech. Origins and definition The term logistics comes from the Greek logos (λόγος).issues. and often security. supplying & maintenance of military forces in the field." Another dictionary definition is "the time-related positioning of resources. but is constantly changing. This can involve anything from consumer goods such as food. ratio." As such. and more specifically from the Greek word logistiki (λογιστική). from raw materials through to finished goods[citation needed]. When talking in terms of human resources . meaning accounting and financial organization[citation needed]. inventory. The Oxford English Dictionary defines logistics as "the branch of military science relating to procuring. Later on it was used to describe the management of materials flow through an organization. military officers with the title Logistikas were responsible for financial and supply distribution matters[citation needed]. to aerospace and defense equipment. ammunition and rations as they moved from their base to a forward position. Logistics involves the integration of information. visualized and optimized by plant simulation software. phrase". and packaging. Logistics is a channel of the supply chain which adds the value of time and place utility. Today the complexity of production logistics can be modeled. These restrictions can bring importers increased liability and compliance costs Logistics is the management of the flow of goods between the point of origin and the point of use in order to meet the requirements of customers or corporations. reason. Its original use was to describe the science of movement. logistics is commonly seen as a branch of engineering that creates "people systems" rather than "machine systems". warehousing. The word logistics has its origin in the French verb loger to lodge or to quarter. In ancient Greek. analyzed. personnel and facilities.

But when decisions need to be made. parts and/or finished inventory from suppliers to manufacturing or assembly plants. which ultimately work for the final consumer or to delivery. They are high due date reliability. i. low inventory level and high capacity utilization. logistics contains the integrated planning. make or buy decisions.management. supplier management. The main targets of logistics can be divided into performance related and cost related. "recruiting manpowers".and product flow including the necessary information flow in industrial and trading companies along the complete value-added chain (and product life cycle) for the purpose of confirming to customer requirements. logistics means giving inputs. control.part. This is what makes being a logistician challenging and interesting. short delivery times. requirements planning.e. According to the Council of Logistics Management. one can distinguish the main fields of it as it follows: • • • • • Procurement Logistics Production Logistics Distribution Logistics After sales Logistics Disposal Logistics Procurement Logistics consists of activities such as market research. warehouses or retail stores. . realization and monitoring of all internal and network-wide material-. there is always a trade off between these targets. [edit] Logistics Fields Given the services performed by logistics. Outbound logistics is the process related to the storage and movement of the final product and the related information flows from the end of the production line to the end user. [edit] Main logistics targets Logistics is one of the main functions within a company. [edit] Logistics viewpoints Inbound logistics is one of the primary processes and it concentrates on purchasing and arranging inbound movement of materials.

Production logistics activities are related to organizational concepts. and transportation. Disposal Logistics' main function is to reduce logistics cost(s).maximize the efficiency by concentrating on core competences. warehousing. and save natural resources. Distribution Logistics has. logistics officers manage how and when to move resources to the places they are needed. place.ordering. availability. It consists of order processing. since an armed force without resources and transportation is defenseless. as main tasks. the delivery of the finished products to the customer. Alexander the Great. Production Logistics connects procurement to distribution logistics. enhance service(s). The defeat of the British in the American War of Independence and the defeat of the Axis in the African theatre of World War II are attributed to logistical failure. Integrated Logistics Support (ILS) is a discipline used in military industries to ensure an easily supportable system with a robust customer service (logistic) concept at the lowest cost and in line with (often high) reliability. and quantity of consumption. outsourcing while maintaining the autonomy of the company. layout planning. Distribution logistics is necessary because the time. and so have developed advanced implementations. and minimization of procurement costs while maximizing the security within the supply process. [edit] Military logistics Main article: Military logistics In military science. and control. and quantity of production differs with the time. maintaining one's supply lines while disrupting those of the enemy is a crucial—some would say the most crucial—element of military strategy. place. and the Duke of Wellington are considered to have been logistical geniuses. and order controlling. production planning. In military logistics. The targets in procurement logistics might be contradictory .[citation needed] The historical leaders Hannibal Barca. maintainability and other requirements as defined for the project. . The main function of production logistics is to use the available production capacities to produce the products needed in distribution logistics. Militaries have a significant need for logistics solutions.

As equipment ages more and more repair parts are needed over time. and future demand. Lack thereof can lead to a clunky.[1] History has shown that good logistical planning creates a lean and efficient fighting force. peacetime consumption of ammunition and fuel will be considerably less than wartime consumption of these items. More troops will require equally more uniforms and food. and ill-equipped force with too much or too little supply. Troops will always require uniform and food. Logistics as a business concept evolved in the 1950s due to the increasing complexity of supplying businesses with materials and shipping out products in an increasingly globalized supply chain. consumption. deterioration. By recording and analyzing these trends over time and applying to future scenarios. For instance. the US Military can accurately supply troops with the items necessary at the precise moment they are needed. Business logistics can be defined as "having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer".Supply chain management in military logistics often deals with a number of variables in predicting cost. slow. [edit] Business logistics A logistics provider's warehouse of goods being stacked on pallets with a forklift. Other classes of supply must consider a third variable besides usage and quantity: time. Some classes of supply have a linear demand relationship—as more troops are added more supply items are needed—as more equipment is used more fuel and ammunition is consumed. whereas other classes of supply such as subsistence and clothing have a relatively consistent consumption rate regardless of war or peace. even when usage and quantity stays consistent. and . The US Military's categorical supply classification was developed in such a way that categories of supply with similar consumption variables are grouped together for planning purposes. leading to a call for experts called supply chain logisticians.

Production logistics can be applied to existing as well as new plants. allowing even a single customer's demand to be fulfilled efficiently. [edit] Production logistics The term production logistics is used to describe logistic processes within an industry. Production logistics is becoming more important with decreasing batch sizes. Production logistics provides the means to achieve customer response and capital efficiency. a batch size of one is the short-term aim. but to streamline and control the flow through valueadding processes and eliminate non–value-adding ones. There are two fundamentally different forms of logistics: one optimizes a steady flow of material through a network of transport links and storage nodes. purchasing. In many industries (e. supply chains and resultant efficiencies. Manufacturing in an existing plant is a constantly changing process. The purpose of production logistics is to ensure that each machine and workstation is being fed with the right product in the right quantity and quality at the right time. or external focus (outbound logistics) covering the flow and storage of materials from point of origin to point of consumption (see supply chain management). warehousing.g. The goal of logistics work is to manage the fruition of project life cycles. Machines are exchanged and new ones added. implements and controls the efficient. which gives the opportunity to improve the production logistics system accordingly. the other coordinates a sequence of resources to carry out some project. especially in the automotive and medical industries. transportation. consultation and the organizing and planning of these activities. Track and tracing. logistics may have either internal focus (inbound logistics). [edit] Logistics management Main article: Logistics Management Logistics is that part of the supply chain which plans. mobile phones). The main functions of a qualified logistician include inventory management. which is an essential part of production logistics—due to product safety and product reliability issues—is also gaining importance. The concern is not the transportation itself. In business. Logisticians combine a professional knowledge of each of these functions to coordinate resources in an organization.is the science of process and incorporates all industry sectors. effective forward and reverse flow and storage of goods. services and related information between the point of origin and .

Working synergistically. the most common are as follows: • • • • • Materials Management Channel Management Distribution (or Physical Distribution) Business or Logistics Management or Supply Chain Management The Chartered Institute of Logistics & Transport (CILT) was established in the United Kingdom in 1919 and was granted a Royal Charter in 1926. a WMS can tell the system it is going to need five of stock-keeping unit (SKU) A and five of SKU B hours in advance. has more customized . WMS and WCS can resolve these issues and maximize efficiency for companies that rely on the effective operation of their warehouse or distribution center. A WCS can prevent that problem by working in real time and adapting to the situation by making a last-minute decision based on current activity and operational status. that offers professional qualifications or degrees in logistics management. but by the time it acts. a WMS plans a weekly activity forecast based on such factors as statistics and trends. other considerations may have come into play or there could be a logjam on a conveyor. the differences between warehouse management systems (WMS) and warehouse control systems (WCS) can be significant. The Chartered Institute is one of the professional bodies or institutions. compared with basic logistics services. Simply put. For instance.[2] [edit] Logistics outsourcing Logistics outsourcing involves a relationship between a company and an LSP which. Logistics management is known by many names. for the logistics and transport sectors.the point of consumption in order to meet customer and legal requirements. working in real time to get the job done by the most effective means. whereas a WCS acts like a floor supervisor. A professional working in the field of logistics management is called a logistician. [edit] Warehouse management systems and warehouse control systems Main articles: Warehouse management system and Warehouse control system Although there is some functionality overlap.

essentially taking responsibility of a complete process for the customer. or it could be that specialist equipment is needed urgently to prevent instances such as aircraft being grounded (also known as "aircraft on ground"-AOG). Some have described a 4PL as a general contractor who manages other 3PLs. forwarders. Logistics is an emerging business area in many countries. [edit] Fourth-party logistics Main article: Fourth-party logistics The concept of Fourth-Party Logistics (4PL) provider was first defined by Andersen Consulting (Now Accenture) as an integrator that assembles the resources. and others. has a rather strategic nature.[citation needed] The reason for enlisting emergency logistics services could be a production delay or anticipated production delay. a company with its own warehousing facilities decides to employ external transportation. Whereas a third party logistics (3PL) service provider targets a function. and run comprehensive supply chain solutions. thus. capabilities and technology of its own organization and other organizations to design. is characterized by a long-term orientation. custom house agents.[3] [edit] Third-party logistics Main article: Third-party logistics Third-party logistics (3PL) involves using external organizations to execute logistics activities that have traditionally been performed within an organization itself. encompasses a broad number of service activities. ships being delayed. supply chain and manufacturing industries to denote specific time critical modes of transport used to move goods or objects rapidly in the event of an emergency. or telecommunications failure. a 4PL targets management of the entire process. [edit] Emergency logistics Emergency logistics is a term used by the logistics.[citation needed] . truckers.offerings. this would be an example of third-party logistics. build. Emergency logistics services are typically sourced from a specialist provider. third-party logistics includes any form of outsourcing of logistics activities previously performed in-house.[4] According to this definition. for example. If. and.

airport or freight forwarder or within the logistics department of a company. A new trend in the industry are the 4 PL . logistics is a very broad field encompassing procurement. They hire students with a BA or MA in International Logistics. Hence. the career perspectives are very broad also. However.consulting companies offering logistics services. production. as mentioned previously. One can either work in a pure logistics company such as shipping line.[edit] As a profession A logistician is a professional logistics practitioner. offering undergraduate and postgraduate programs . distribution and disposal activities. Professional logisticians are often certified by professional associations. Some universities and academic institutions train students as logisticians.

We are specialist logistics cost reduction consultants and have the industry knowledge and skills to help you minimise the effect of the current situation on your business. the issue are the same. drivers hours costs to name a few just keep going up and up. Distribution Logistics Cost Reduction "Never a better time than Now" Customer deliveries and associated distribution costs keep rising.Rising Costs The Credit Crunch is hitting transport and distribution operations very hard. Some Questions you may be asking about your current transport & distribution operation? Is our delivery routing & scheduling optimised? Do we have the right number. . The best way of maintaining profits in these circumstances is to reduce operational costs. fuel. types & mix of vehicles? Are our depot's and our 3pl providers depot's in the best location? Are we getting the best cost & service from our fleet or our 3pl contractors? What can we do when our volumes per drop are reducing. Customer do not want to pay more for the products. by working smarter and not harder. and the numbers of times a customer wants a delivery is increasing? • • The fact is that many businesses who use 3pl contractors never look at these factors. Our cost reduction programme is tailored to both In-house fleets and businesses using 3pl contractors. take it from us. therefore margins are reducing. reduced volumes but still having to deliver the same routes for customers.Distribution Transport . In-house fleets suffer from the same issues. and you will be paying for them in your exiting rates. the contractor will have his own in-efficiencies.

Market rate check will bring to light other more economical operations. Audit of freight costs: Use specialized agencies that provide post payment audit of freight bills. Focus needs to be on renegotiating freight and shipping rates. New carriers: Constant market rate check is a best practice. the seller also arranges to pick it up. Starting point should be mandating delivery appointments. At times. Managing returns: Reverse logistics is an important element of freight costs. ports etc. logistics managers get into a comfort zone with the existing carriers. Usually. Technology also allows coordination of all shipments to optimize loading. 60. it can be returned in 30. This leads to cost creep. These agencies are usually paid on a profit . If the customer is not satisfied with the product.Logistics cost form an important part of the overall cost structure in any organization. reduction in overall freight costs and streamlining operations. Most companies offer a liberal returns policy. Arrangements with a number of smaller local carriers sometime s provide the best rate/best service combination. documents needs to reach at least twenty four hours in advance to avoid delays at the border. New carriers may be more flexible in their quotes. Internet offers excellent tools for comparing and optimizing freight costs Improve shipping and receiving: Streamlining shipping and receiving practices will offer substantial savings. Technology: Internet tools enable substantial reduction in paperwork.There are six best practices that can be followed by most businesses to reduce costs. A flow chart needs to be made of all the operations to determine wasteful processes and combining existing processes. 90 days depending on the seller. This can happen through reduction of window time for receiving. Documents are scanned and emailed to customs. Renegotiation of minimum billing to a minimum for a zone needs to be explored. In case of cross border trade. To minimize costs associated with reverse logistics processes needs to be streamlined. Today both the USPS and Canada Post offer viable options for small packages. Freight costs: There are several options to optimize freight costs. Product delivery coordination is another useful tool to streamline freight costs.

These audits also provide valuable insight into patterns and other cost reduction opportunities. For additional resources please visit .sharing basis.taxes. Easwar has an extensive knowledge of issues related to currency.exchange.cost savings ideas and loves to write about it.

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