Consumers may not be aware of it, but most companies engaged in shipping products are likely struggling with rising logistics costs.
On the one hand, the COVID economy has led to booms such as warehouse construction, as consumers increasingly purchase goods online and expect delivery right to their doorsteps. But the costs of business logistics have also risen as strains on the global supply chain intensify.
Much of this has been driven by unforeseen demand. Many manufacturers initially cut back on production when the pandemic erupted, anticipating a slump in consumer purchasing. But in fact the opposite occurred. Consumers continued to spend, often generating greater demand for some goods and products, and turned increasingly to e-commerce platforms while brick-and-mortar retail stores suffered through lockdowns. This unexpected demand has led to struggles with stockpiles and a finite supply of shipping containers, which in turn has resulted in bottlenecks, delays and risings costs. Meanwhile, there is a shortage of qualified truck drivers just when they are needed the most.
These trends could change as the global economy gradually re-opens. But that timetable remains uncertain because of complications with vaccines and COVID variants. And with a significant portion of the workforce projected to continue to work from home even after the pandemic is brought under control, demands on the global supply chain are likely to keep increasing.
Companies engaged in shipping products who don’t want to pass costs on to consumers must make reducing logistics costs a priority to stay competitive. Here are several strategies they can implement to keep these costs low.
Account for Increasing Labor Costs
The United States is facing a shortage of qualified, experienced truck drivers for a variety of reasons. Drivers of around baby boomer-age have begun to retire in large numbers and new drivers aren’t entering the workforce fast enough to replace them. The truck driving industry struggles to recruit new workers, in particular women, who make up a large portion of the workforce. For those young adults not attending college, interstate truck driving is not an option until they are 21, by which time they have likely chosen another field of work. And the pandemic has at least temporarily shuttered many driving schools, closing even more truck driving career paths.
All this means demand for shipping falls on an increasingly small cohort of qualified truck drivers, which in turn drives up costs. To keep these labor costs down, companies that contract for trucking needs may consider working with freight brokers. A quality freight broker will work with a vast network of carriers and have the expertise to find the most cost effective and available truck drivers, even in a pinch. A good freight broker can also help better streamline delivery operations and avoid unnecessary expenses, helping to better manage supply chain costs. Choosing your supply chain partners wisely is key to reducing labor and logistics costs.
Find Ways to Reduce Shipping Weight
Reducing shipping weight plays a significant role in reducing logistics costs. More weight requires more fuel to push heavier shipping loads, resulting in higher transport expenses, as well as higher carbon emissions. These expenses could be driven even higher in the United States in coming summer months by a fuel shortage brought on by the shortage of truck drivers needed to transport fuel out to gas stations.
Companies may consider investing in lightweight packaging for their products or partnering with companies who can produce such packaging. This means creating lighter, more efficient versions of their product packages that are often also eco-friendly and help reduce fuel costs through lighter shipping loads.
Companies can also reduce shipping weight by using lightweight pallets for shipping. Wooden pallets are heavy and add unnecessary pounds to loads. Plastic pallets, by contrast, can be up to 35 percent lighter.
Outsource Logistical Operations
An increasing number of businesses are choosing to outsource a significant portion of their supply chain operations. This includes contracting with freight brokers, as mentioned earlier, but can also include storage and warehouse operations. Outsourcing, if implemented properly, can offer the convenience of entrusting logistical operations of your company to more efficient and skilled professionals, with resulting cost reductions. This again involves choosing supply chain partners wisely, and ensuring those partners agree on important aspects of supply chain operations such as frequency and size of shipments, packaging, and product handling.
One example of effective outsourcing for companies that operate warehouses involves engaging a pallet pooling company, instead of buying and managing a supply of shipping pallets. Renting plastic pallets from a pallet pooling company ensures that a supply of pallets in good repair and ready for use arrives at your facilities when needed. The company will also arrange for the used pallets to be taken to other companies or back to your other facilities if required. This saves your company from having to manage its own pallet supply, and reduces the complexity of pallet procurement and recovery, as well as your Total Cost of Business (TCOB). Pallet pooling can be a very effective tool in reducing logistics costs.
As consumer demand for deliveries continues to grow, companies need to find new ways to reduce logistics costs. Implementing these strategies will enable companies to stay competitive even as the global economy continues to reopen and evolve.
Companies that prioritize reducing logistics costs use iGPS plastic pallets for all their shipping needs. Our pallet pooling program helps lower fuel expenses and reduces Total Cost of Business. For more information, contact us at 1-866-557-0047, email a specialist at [email protected], or visit our contact page.