How your small business can save money on rising logistics costs


Man sitting in a chair reading a business report on a tablet

Man sitting in a chair reading a business report on a tablet

Dealing with rising logistics costs

From sourcing materials to storing goods to shipping to your customers, logistics costs add up. They can be a major part of your business’s expenses, and they seem to be continually rising. If you’re not looking at how you can scale back your logistics costs, you’re hurting your business’s bottom line. While tackling these kinds of costs might seem overwhelming, there are some things you can do to manage your business’s logistics costs.

Understand your logistics costs

Reducing your logistics costs begins with evaluating them. Until you understand how your business is spending money on logistics, you can’t understand how to reduce logistics costs. Take the time to understand how much you are spending on packaging, shipping, labour and storage. Know how much each container costs you to ship, and how much you are spending on logistics for each item in your inventory.

Once you understand where your logistics budget is going, you can begin to look at how to pare back on those costs. Break apart the fixed costs that you don’t have the power to change and the variable costs. By knowing which costs you can influence, you can begin to identify where you can save money in your supply chain.

Understand your inventory

When it comes to reducing logistics costs, many experts will suggest maintaining higher inventory levels. Carrying higher inventory levels means less frequent supply shipments and you don’t risk paying more for last-minute supplies. Unless you evaluate and understand your inventory, your supply needs and your space, it can be difficult to maintain higher inventory without running the risk of overstocking.

Know which items move faster than others and what you should have more of on hand. Monitor the flow of your inventory, and keep an eye on peaks in demand that call for increased inventory. Evaluate your inventory space and determine whether you could be shelving your inventory more efficiently to store more items in less space. Be sure to keep and regularly evaluate your inventory data so you can make better decisions on your inventory levels to save on shipping and storage logistics.

Plan regular shipments

Consider when you order items or contract shipments for your business. If you are waiting until you need to ship something or until you need something in stock, you’re spending more on shipping than you need to. When you’ve analyzed your supply and inventory needs, you can begin to contract your shipping in advance to save your business money on shipping costs. Many companies will offer savings when you contract multiple shipments at once or when you contract for shipping further in advance.

When logistics companies have orders on the books in advance, they can better manage how they’re filling their shipment containers to lower their costs, which means your costs are lower. Contracting logistics in advance, or working with the same companies for supplies and shipments over and over again, can help you develop good working relationships with your logistics partners. When you have those solid relationships, you can work with your partners to lower costs, and they likely will reward you for your loyalty with better pricing over time.

Involve everyone in logistics savings

If you’re committed to keeping your logistics costs low, you’ll need to involve every team in your business. That’s because nearly every department impacts your logistics costs. Product developers can look at supply or design options that will lower your supply logistics costs and your product distribution costs. Your marketing team can keep a calendar of initiatives that are likely to bring a surge in business to help you beef up inventory in advance. Your warehouse team can find efficiencies in their operations or in their storage methods.

When all of your teams are aware of how they play a role in logistics and keeping the costs low, they can contribute to this goal on a consistent basis.

Logistics is an expensive part of every business, which makes keeping logistics costs in line essential to maintaining your business’s profits. Keeping those costs low involves constantly monitoring data that will help you make better decisions, planning your logistics as far in advance as possible and involving your teams in moderating logistics costs. By actively tracking, evaluating and controlling your logistics costs, you can save money and better protect your business’s bottom line.

Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Author: Jennifer Nesbitt

Jennifer Nesbitt is a New York-based freelance copywriter. A former journalist and graduate of Penn State University, Jennifer now writes about a variety of topics, including business, technology and marketing. She is passionate about helping companies develop their brands by providing compelling copy that adds value to their online presence.

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