Reducing logistics costs can feel like a never-ending challenge.
With so many areas to consider—transportation, warehousing, inventory, and more—it’s easy to feel overwhelmed.
But instead of trying to solve everything at once, focusing on some specific area can deliver meaningful results.
Let me show you an approach that works in the video below.
Simplifying the Process of Reducing Logistics Costs
Reducing logistics costs is top of mind for many businesses today. With increasing costs, constrained resources, and flat sales, logistics and supply chain leaders are under pressure to find solutions. The difficulty often lies in knowing where to start when it feels like there are countless areas to examine.
But cutting logistics costs doesn’t have to be complicated. There’s a specific area to focus on that can make a big difference.
The Many Facets of Logistics Costs
Logistics costs often come from various directions: procurement, transportation, warehousing, inventory, and delivery to customers. With so many aspects to manage, it’s easy to get lost in trying to tackle everything. But to effectively reduce costs, it’s best to concentrate on one key area that can lead to the most impact.
From my experience in consulting, I’ve found that looking at the cost of serving your customers, especially focusing on order size and order frequency, is where significant savings can be found.
The Problem with Small Orders
Small orders are often the biggest drain on logistics budgets. While many businesses deal with a mix of order sizes, small orders tend to incur higher costs per unit. These orders are costly to fulfill, so reducing them can have a major impact on overall logistics costs.
By reviewing your customer’s order profiles and identifying which ones are small but frequent, you can begin to focus on ways to either increase the size of those orders or reduce the frequency of deliveries. A shift here can significantly reduce your costs without a lot of effort.
Turning Customer Behavior into a Cost-Saving Opportunity
At first, it might seem difficult to convince customers to change their ordering habits, especially when it comes to delivery frequency or order size. However, many customers are willing to adapt if they see a clear advantage. By offering incentives—like discounts for larger orders or fewer deliveries—you can encourage customers to modify their behavior, leading to cost savings for both sides.
This creates a win-win situation, where you reduce logistics costs, and your customers enjoy better service at a lower price.
How to Get Started?
Not sure if small orders are hurting your margins? Try a quick self-assessment. By answering a few questions, you can quickly identify whether frequent, small orders are causing your logistics costs to spike.
Just click this link to start your self-assessment: Supply Chain Profit Leak Audit
Related articles on this topic have appeared throughout our website, check them out:
- How to Improve Warehouse Layout Efficiency and Save Costs
- Energy and Labour Costs: 2 Top Warehousing Challenges
- Cost to Serve Analysis—And the Costs of Neglecting It
- 12 Smart Ways to Reduce Your Freight Costs
