Logistics has always been important to business. It’s key to moving goods from one destination to another. Get something wrong, and it could lead to problems all the way down the line. Today, however, logistics has become much more than back-office fare, taking on a foundational role in whether a business will be a success. Problem is, costs are on the rise within the industry. In the U.S. alone, business logistics saw costs increased by 22.4% for 2021, reaching $1.85 trillion.
Needless to say, everyone is looking for ways to save money on this aspect of business. But it’s possible to not only cut costs with logistics. Business can also work toward scaling operations at the same time. It’s not an either-or scenario, and the following are often the most logical and cost-effective of options:
Consolidate the shipment of goods.
While probably the most obvious strategy for cutting logistics costs, it’s still worth noting that shipping goods in a “full container loads” (FCL) is often more cost effective than the alternative of “less than container load” (LCL) — due in no small part to its per volume rates. Even when the whole container isn’t filled to capacity, it can be a more economical option. But this isn’t just a result of shipping rates.
For one, total transit time can be cut by anywhere from four to seven days. The container is transported directly to the destination, after all. There’s also less handling time, as the container isn’t shared by any other vendors and thereby doesn’t require deconsolidation. Naturally, less handling can minimize the risk of damage to any of the goods. All in all, this can translate into cost savings for a business.
However, there will be times when LCL may be more advantageous for a business, as there are expedited shipping options and can add more flexibility to logistics.
Explore pooling freight.
Similar to consolidating shipments, many businesses are making moves toward freight pooling. Sometimes referred to as pool distribution, this strategy is also a method of consolidation. But instead of a single vendor, multiple businesses consolidate “less than truckload” (LTL) freight or partial shipments for delivery to a regional pooling center or warehouse, where the goods are then sorted and delivered to their final destination.
On its own, multiple businesses splitting the transportation costs can provide significant cost savings. It also provides businesses the opportunity to pool multiple orders for a specific market that will then be sorted and delivered from the regional pooling point, which too provides cost savings — especially when compared to multiple LTL freights. Beyond that, using pool distribution can reduce distribution costs when pooling freight to a specific market, as the shipment is already in the region.
Other benefits can be found in transit time, handling fees, and even reducing the number of freight loads at docks.
Upgrade the logistics tech stack.
Digital transformation is upon us, and a legacy tech stack could very well be holding your operations back. In fact, many of the technology solutions available simply won’t work as well when integrated on top of an outdated logistics tech stack. Moving to a modern, cloud-based system may be the solution. The options are many, unfortunately. So, time and attention should be paid to the selection process.
First and foremost, look of a third-party provider that offers a single, connected platform, where everyone involved in your operations can access the information across the supply chain. Greater visibility should help you avoid any redundancies or duplicated activities that could be reducing productivity and efficiency — while driving up unnecessary costs in the process.
Data integration will also be an important feature, as it provides a means for capturing and analyzing logistics data to derive insights to inform strategies going forward. The potential for identifying bottlenecks alone can be of great benefit to the bottom line. The same can be said for price discrepancies, route optimization, last-mile delivery accuracy, and so on.
Besides, the artificial intelligence (AI) offered with many of today’s technologies offer the opportunity to use advanced analytics to find areas for cost improvements outside of the traditional solutions. You understand what’s happening, why it’s happening, and how to make adjustments to improve efficiencies.
Control fleet costs.
When it comes to cost savings with logistics, businesses often overlook one of the most critical components: the fleet itself. Poor decisions are made in terms of both acquiring and deploying equipment. Acquiring in particular can be especially problematic, as the main consideration for equipment purchases is price. “Am I getting a deal?”
Not that cost isn’t important, but other factors are at play when determining the direction of a purchase, such as reliability, durability, maintenance, and so on. For example, many of today’s medium-duty trucks are powered by an international DT466 engine, largely due to its power, affordability, and reliability. It’s also possible to do an “in-chassis” rebuild on the engine, which can be much more economical for preventative maintenance purposes. GM 6.6L Duramax is also a popular choice, as it offers a quieter ride, a good amount of horsepower, and higher efficiency — with lower emissions, on top of that.
When it comes to semi-trucks, the Detroit 60 series often tops the list. It’s an inline-6 four stroke diesel engine with fully integrated electronic controls, offering a good balance between fuel efficiency, longevity, and performance. It can run anywhere from 1 million to 1.5 million miles before requiring any major work.
Conduct regular audits.
A good old-fashioned audit can tell you a lot about operations, particularly when it comes to freight. If you haven’t yet automated the process, the time to do so is during a rebuild of your logistics tech stack. It can bring all your invoices and transactions together into a single, centralized platform, allowing you to monitor and flag rating errors, fee errors, weight inconsistencies, duplicate charges, and even unapplied discounts.
Like any other aspect of business, logistics will continue to evolve. It’s never a “set it and forget it” endeavor, requiring regular attention beyond your attempts to scale. New technologies will emerge, new processes will come to light, and new disruptions will likely shake up the industry again and again. But the one thing to remember about logistics is that it always holds the potential for savings. It’s all in the attention paid to this aspect of operations.
John Clifford is a managing partner at Big Bear Engine Company, which has deep roots in the heavy-duty diesel industry — most notably in the remanufacturing and machining of large diesel engines. Their master engine builders all have 30+ years of experience building and working on diesel engines. They specialize in three medium-duty engine models: Cummins 4BT, Cummins 6BT and Caterpillar 3306. The company has also established itself as an industry leader catering to the 4BT Jeep Swap and Off-Roading Communities.