If you want to reduce logistics costs, you have to take the time to review your processes. Nathan Pieri, senior vice president of marketing and product management for Rutherford, N.J.-based Management Dynamics, offers these tips for trimming your logistics budget.
1. Eliminate supply chain bottlenecks. By periodically reviewing and analyzing their supply chain networks, companies can pinpoint issues and proactively address them. Strategies to reduce or eliminate bottlenecks include addressing vessel schedule planning, ensuring proper documentation and regulatory compliance for imports and exports, and revamping network design.
2. Reduce inventory at the port, manufacturing sites, and warehouses. Companies often stock excess inventory because they lack supply chain visibility. To effectively reduce excess inventory, you have to gain reliable information on future orders.
3. Cut demurrage and detention fines. While an occasional fine may not seem like much, these costs can add up. Auditing carrier bills and tracking where issues occur in the supply chain can substantially cut fine payments.
4. Identify opportunities to shift modes. Without adequate visibility into logistics operations, a company may not realize that an air shipment could move by sea at a much lower cost. Companies that use technology to evaluate modal options typically see a five- to eight-percent cost reduction.
5. Use postponement strategies to divert inventory at an international gateway. A successful postponement strategy can dramatically lower forecasting errors as well as improve customer service by reducing out-of-stocks. Companies also can cut transport costs by reducing inventory misallocations and shipping more items in bulk.