Until recently, logistics was considered a fully operational sector, but today it has become part of the strategic sector of companies in different branches.
That is why, nowadays, this sector has been the target of the attentive eyes of managers who seek to make readjustments for improvement.
It is known that logistics can consume a considerable portion of a company's revenue and precisely for this reason, managers are always looking to reduce these rates.
In view of this, the reduction in costs within the supply chain started to influence decision making.
To better understand logistics and ways to cut costs within a supply chain, follow this article.
The importance of logistics and its impact within an organization
Logistics is the area responsible for organizing the flow of people, materials and also information, always aiming to increase the efficiency and speed of the processes.
In general, within a company, logistics is responsible for the processes that are related to the products, as well as for the transmission of the information necessary for them to occur.
Due to its role it is extremely important within a company, being essential for the success of the organization.
However, for the company to benefit, the logistics must be very well planned, executed and controlled, which often requires large amounts of money.
Therefore, it is very important that those responsible for the company's management know very well each of the costs and their impact on billing.
Only then is it possible to identify which expenses should be cut, as well as the strategies that will be used for this.
However, it must be said that reducing costs is a major challenge for companies that cannot compromise the quality of the services provided or the products that are delivered to customers.
That is why it is necessary to study in depth the ways to reduce costs, plan actions and thus increase profits.
Currently, the market has become increasingly competitive, where the offers presented are very similar.
Thus, the great opportunity to stand out may be through better administrative management, with a focus on cost reduction in the supply chain.
What are logistical costs?
First, the logistical cost is the portion of the price of a product that results from different logistical operations.
For their identification to be accurate, it is necessary for the manager to carry out a detailed mapping of all logistical processes.
This can be done through flows, where each person must have one or more responsible people.
From this, the costs of each of them can be correctly established, and so actions can be put in place reduction .
For most companies, some specific and well-known measures apply. See below what they are and how to put them into practice in your business.
5 ways to cut supply chain costs
Logistics involves different supply chain processes that involve the movement of materials and products.
This includes everything from the departure of the inputs from the supplier's address, to their production and delivery to the final customer.
Because it consists of many stages, this flow of materials is highly complex. It can be very difficult to do the proper control of transportation, inventory, planning and strategies.
That is why it is necessary for the manager to be able to analyze each step separately and thus find ways to reduce costs in each one.
Although the costs related to the supply chain are different between different companies, there are ways to reduce the cost that are common to all. Here are what they are:
1. Eliminate failures that cost money
For many companies, logistics is the sector with the highest number of failures, which can be very expensive.
So the first measure to be taken is to evaluate the different processes with a critical eye, looking for flaws that can be reversed.
These analyzes must be constant, as well as improvements. To facilitate this step, Lean and Six Sigma principles can be used, aimed at eliminating problems and optimizing costs.
2. Properly map the processes
In companies where the processes are not properly standardized, employees end up acting according to their own will, following their own opinions about what is right or wrong.
Without the correct foundation and connection between the stages of the supply chain, the number of errors and the rate of waste are very high.
Given this, it is necessary to map the processes in detail, adopting strategies that collaborate for a better efficiency of them, avoiding bottlenecks and waste.
Thus, the correct understanding of the flow of activities allows managers to be able to redesign the entire production layout.
As a result, tasks are shortened, their time is reduced and resources can be much better used.
Here, it is also worth mentioning that throughout the processes, waste and loss of materials are also very common, representing losses of money along the supply chain.
Thus, it is necessary once again to carry out frequent reviews of the planning of operations throughout the entire supply chain. This should be incorporated into the company's routine.
3. Reduce inventories
Although inventories are responsible for supplying the company's demands, they are still working capital, take up a lot of space and demand capital to keep employees responsible for them.
Many companies maintain inventories that are much larger than what would actually be needed to supply the demands and that is why it is essential that there is a correct assessment regarding the possibility of reduction.
This can contribute to greatly reduce the costs of maintaining these products, but it is necessary to maintain adequate levels of security so that product availability is not compromised.
In addition, there is often poor inventory management, leading to the loss of products due to expired expiration dates or poor storage. So it is also necessary to eliminate these problems in order to optimize profits.
And one of the most efficient ways to maintain this type of control is through automation for organizing and integrating information.
In this case, the cost reduction obtained far exceeds the initial investment required for the implementation of the technology.
4. Consider performance indicators
Within any company, performance indicators, or KPIs - Key Performance Indicators are extremely useful tools for managers to evaluate the results obtained.
Their analysis allows flaws to be identified and, when corrected, consequently result in reduced waste and increased efficiency.
In other words, through the indicators it is possible to monitor the development of the business and the efficiency of the various processes throughout the supply chain.
By observing indicators such as freight costs, inventory costs, re-delivery rates and product breakdowns, it is possible to optimize resources, eliminating operational errors.
5. Invest in outsourcing logistics transportation
The fifth way to cut supply chain costs is by outsourcing logistics processes, but your cost benefit must be carefully assessed.
In general, outsourcing is usually positive because it simplifies processes, reduces costs and generally brings a higher level of customer satisfaction.
The reduction in costs in the case of outsourcing cargo transportation is mainly due to the fact that it is not necessary to maintain own drivers or to maintain their own vehicles, for example.
This exempts the company from paying labor charges, fuel costs, tax and insurance costs, safety devices and garage maintenance for the fleet, for example.
In this sense, having a partner how brclog can bring many advantages to your company, causing a considerable reduction in costs.
brclog has a complete range of services that can be hired in a customized way, aiming to solve the needs of each client specifically.
Some options are:
- Product transport
- Freight forwarding
- Distribution and delivery management
- Reverse logistic
- Complex combinations of air, sea and road
- Dedicated and fractional trucks
- Port, airport, warehouse and supplier removals
- 100% vehicles tracked and insured
Brclog's fleet is diversified, aiming to meet different demands for different services. Agility and punctuality ensure that products are delivered efficiently, in the shortest possible time.
Thus, the outsourcing of transport is one of the main ways to reduce costs while maintaining the efficiency of your supply chain, increasing customer satisfaction and the profit of your company.
Logistics involves a series of processes ranging from the departure of materials from your supplier to delivery to the end customer, and along them, failures can occur that cost companies dearly.
Therefore, the correct supply chain management is necessary, but it requires dedication and often a large financial investment.
Over the 5 ways to cut supply chain costs were exposed.
This cost reduction is essential for the company to remain competitive and thus survive in the face of market pressures.
So, get to know brclog now, and reduce your costs in the Supply Chain. Consult our team for more information, we are always ready to serve you better.