If you want to run a successful e-commerce business, it becomes essential for you to reduce your logistics costs. Now, the question arises, how exactly do you minimize your logistics costs? That too, without sacrificing any kind of service or customer satisfaction?
Thankfully, the major part of it can be reduced with sound logistics planning, informed decision-making, and with the help of a competent 3PL and various logistics software to back you up.
This article will show you the important strategies to reduce supply chain costs, improve customer satisfaction, and increase operational efficiency.
Let’s get started!
What are Logistics Costs?
Every company has a different understanding of what qualifies as a logistics cost. However, for most purposes, logistics costs consist of the expenses that occur while moving products from sourcing to final delivery.
Usually, logistics costs include procurement, storage, packaging, labor, transportation, and the administrative costs of transportation of products from one end of a supply chain to the other.
These costs are mainly paid to logistics industry vendors, such as 3PLs, freight carriers, transportation brokers, warehouse space, etc in most cases. Though it might include the cost of logistics software, warehouse equipment, and fleet maintenance.
Strategies to Reduce Logistics Costs
After understanding what is logistics costs. Based on your business, there are various ways to minimize logistics costs and supply chain expenses:
Improve Customer Satisfaction
As an e-commerce retailer, then your priority should be to reduce logistics costs and also to improve whole customer satisfaction. It is necessary because the more satisfied your customers are, the stronger your bottom line will be.
But, how do you improve customers satisfaction?
You begin with taking steps to minimize cart abandonment and increase average order value.
- Reduce Cart Abandonment Rate
One of the most problematic issues that are faced by e-commerce retailers is cart abandonment problems caused by the high cost of shipping. That is the reason why various e-commerce businesses opt to provide low-cost or free shipping.
- Increase Average Order Value
To minimize the cart abandonment rate you can also convince shoppers to spend more money by applying a minimum spend threshold to cover the cost of shipping.
Minimize Travel Times
Suppose your warehouse is in Florida but your clients are in California, then your business spends thousands of dollars in logistics costs each year that is needless. So, it will be a far more appropriate use of resources to outsource warehousing and fulfillment to a 3PL in California that can ship your goods to your clients in far less time and for far less money.
The same optimization can be applied to obtainment. It is way more effective to source materials from a supplier near your manufacturing plant than it is to ship the same materials across the country.
If you have to send some shipments to the same place every other week, then it will be far more cost-effective and effective to manage multiple shipments into one shipment. This way, you can reduce the total number of loads you have to pay for, hence reducing your transportation costs to the required minimum cost.
Automate Warehouse and Logistics Processes
Warehouse automation which can be done through warehouse management software, like automated storage and retrieval systems, automated shipping, and modular shelving system enables your warehouse and logistics team members to get excellent outcomes with way lesser time, effort, and resources.
Focus on Informed Decision Making
You can be the best logistics analyst worldwide, but you won’t be able to reduce logistics costs without informed decision-making. How is it possible for you to know where there is excess logistics spending if you don’t have the data, where you can see that you are incurring the excess cost?
A good warehouse management system (WMS) or transportation management system (TMS) can easily provide your team with the data they require to identify inefficiencies, minimize excess expenditure and improve the effectiveness of operations of your supply chain.
There are thousands of hidden logistics costs. So, the ideal way to avoid them is to outsource logistics to a 3PL like BoxOn with a wide network and fulfillment centers. So register yourself here and see how we can help you!