Currently, Logistics Management has gained attention due to the emphasis put on quality of services and goods, and also extreme price competition that cause businesses to control the prices to be able to carry on in the marketplace.
Logistics Management is normally referred to as the process that makes sure the appropriate goods are delivered at the right time to the customers. Logistic management includes the entire supply chain, from the procurement of materials in raw form, to shipping of finished goods and services to consumers.
Logistics activities are normally grouped into two, inbound and outbound activities. Inbound activities are those that deal with matters from procurement to the final production, whereas activities related to distribution channel, which is shipping of the finished services or products to the consumers from the manufacturer’s are known as outbound activities.
The most common areas of logistics management include transport, procurement, storage of goods and transshipment. Below are tips on how to reduce the cost in logistic management.
Choose the mode of transportation such as water, rail, air or through pipeline, which is best suited for the quality and quantity of products being shipped and also required time of delivery. Each mode features its own pros and cons with regards to speed, costs, flexibility, safety and capacity. Damage or loss of goods while in transit can be prevented.
Now a day’s, different analytical and mathematical methods are available to take care of the issues of vehicle routing such as transportation method, shortest route method and many more.
On the other hand, freight consolidation can also reduce the shipping cost to a higher extent. It includes bringing together different small quantities of inventory to create a larger quantity for shipping.
Try to find the suppliers who will supply you with more competitive terms. You may also look for import options also. This does not necessarily mean you change the suppliers regularly, but helps one to be aware of suppliers who can help the company grow. It is advisable to negotiate for favorable rates.
The true costs of sourcing include, brokerage involved in procuring, duty, costs freight and inventory carrying costs. This may help the company to choose the best option.
To increase inventory, adequate capital must be invested for a length of time. By proper evaluation on demand and supply and nature of the goods, this capital cost may be cut down by optimizing the volume of inventory. Make use of scientific technique like Economic Order Quantity (EOQ) to make a decision on order quantity.
Make sure to get the discounts suppliers offer on raw materials when you order a lot. Lower the quantity of storage points to lower the entire variability in demand. This kind of practice is also known as risk pooling. The total carrying charges decrease with a lower provision of safety stock at various storage points.
A company should control the express shipping costs to reduce the high cost incurred. Companies should calculate and plan to determine the quantity of goods required and have the amount sent by express service level. In case of any balance of the shipment, it can be shipped using a standard service level which is less costly.