BlogSupply Chain: Lowering Your Total Cost of BusinessReducing Logistics Costs

Consumers may not be aware of it, butmost 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 consumersincreasingly purchase goods online and expect delivery right to their doorsteps. But the costs of business logistics havealsorisen asstrainson 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.Thisunexpecteddemandhas led to struggles with stockpiles and afinite supply of shipping containers, which in turnhas resulted inbottlenecks,delaysand risings costs.Meanwhile, there isashortage of qualifiedtruckdriversjust when they are needed the most. 

These trends could change as the global economy gradually re-opens. But that timetable remains uncertainbecause ofcomplications with vaccines and COVID variants.And witha significant portionof the workforceprojected tocontinue towork from homeeven after the pandemic is brought under control,demands onthe global supply chain arelikely to keep increasing.  

Companiesengaged in shipping productswho don’t want to pass costs on to consumersmust make reducing logistics costs a priority to stay competitive.Here areseveralstrategies they can implementto keep these costs low.  

Account forIncreasingLabor 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 driversaren’tentering the workforce fast enough to replace them.The truck drivingindustrystruggles to recruit new workers, in particular women, who make up a large portion of the workforce.For those young adultsnotattending college, interstate truck driving is notanoption until they are 21, by which time they have likelychosen another field of work. And the pandemic hasat least temporarilyshuttered many driving schools,closingeven more truck driving career paths. 

All this means demand for shipping falls on an increasingly small cohort of qualified truckdrivers, 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 tooutsource asignificantportion 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 theconvenience of entrustinglogisticaloperationsof yourcompanyto more efficient and skilled professionals, with resulting cost reductions.This again involves choosing supply chain partners wisely,and ensuring those partners agree on important aspectsof supply chain operationssuch asfrequency and size of shipments, packaging, and product handling. 

One example of effective outsourcing for companies that operate warehouses involves engaginga pallet pooling company, instead of buying and managinga supply ofshipping 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 andrecovery,as well asyour Total Cost of Business (TCOB). Pallet pooling can be a very effective tool inreducing logistics costs.   

As consumer demand for deliveries continues to grow, companiesneed to find new ways to reduce logisticscosts. Implementingthesestrategies will enablecompanies to stay competitiveeven as the global economy continues to reopen and evolve.  

Companiesthat prioritize reducinglogistics costsuse 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.