Avoid These 7 Mistakes to Reduce Logistics Costs and Increase Profits

As a business grows, mistakes are easily made. The logistics industry is not an exception to this. Whether it is a major error or a missed opportunity, mistakes in logistics can be pretty costly for the business. These can ultimately lead to a decline in cash flow and sales. But fret not! Most of the mistakes made in logistics are relatively easy to fix. Once you have a clear idea about the possible errors that can crop up in the logistics and supply chain, you can easily bypass them and watch your business grow.

7 Common Mistakes to Avoid to Reduce Logistics Costs

Logistics management is a critical part of the supply chain process that helps in the efficient flow of goods and services from the sources to the consumers. Certain slips are possible here, which, if avoided, can reduce your logistics cost and increase your profits.

1. Ineffective cost reduction tactics

Every business struggles to reduce costs. Once all the easy tasks have been eliminated from the cost reduction checklist, the scope of cost reduction narrows. Hence, it becomes difficult to reduce the expenses any further.

A simple mistake that must be then avoided in the realm of logistics is not noting the number of times goods are handled while being moved from the factory to the customer. Avoid this mistake by keeping a check on how many times the goods are passed from one hand to another.

Every time the goods are handled, the business has to incur various expenses such as equipment costs, labor costs, damage costs, etc. It is best to keep the number of times a product is handled to a maximum of 6–7. Think about how you can achieve this small goal in your logistics, yet make a significant difference in your expenses. Introducing automation here is a useful measure that can be followed.

2. Being ignorant about data

Data is generated in supply chain management globally. This data is related to various aspects such as agreements in prices, logistics, product testings, transactions, etc. Examination of this data is crucial where logistics management is concerned, as it helps to make better decisions in the future.

3. Choosing more partners than required

Launching a new product is a good idea. However, having multiple suppliers of the same product is not as good as it sounds. This is especially true for those brands or businesses that do not have a good support infrastructure or demand for the product.

This is because multiple suppliers can lead to an increased amount of complexities. Therefore, if a product of a particular brand is from multiple contract manufacturers, it implies that the owner of the brand is responsible for managing a certain task multiple times.

The complexities increase almost every time a product is launched with multiple contract manufacturers, which in turn slows down other processes.

4. Not planning for disruptions

"By failing to prepare, you are preparing to fail." – Benjamin Franklin

This quote shows the consequences when businesses fail to have plans for various disorders in their processes. Therefore, conduct rigorous risk management planning in advance. The planning includes a thorough analysis of the supply chain network to troubleshoot vulnerabilities and manage risks.

Logistic disturbances can cause risks to businesses of any size. Problems in the supply chain processes – like during the procurement of raw material for manufacturing the product – can significantly impact the bottom line of the business.

Businesses can also be affected by factors like natural disasters and cyber-attacks. Some other factors which have a huge negative impact on logistics are:

Unreliable transport system: As a business owner, conduct deep research about the transportation partner. Search for transportation companies that can offer more than you require. Always have a backup plan ready to encounter any trouble caused due to disturbances in transportation.
Price fluctuations: As a part of the market, you as a business owner must be aware of market fluctuations. Therefore, be prepared by analyzing market trends and fluctuations. Price fluctuations can be caused by natural and climatic factors. Therefore, be prepared for a fall or rise in price if such situations occur.

5. Lack of security

Breaches in security occur in almost all industries, and the supply chain industry is no exception. These happen due to a lack of strong security measures, mostly in places like the vendor's end, usually because in the case of distributors, the inventories are kept with maximum protection and high-class surveillance to prevent infiltration by outsiders.

Since vendors have a significant role in logistics, they must follow practices such as secure file transfer protocol (to keep cyber-attacks at bay and protect important data), restricting access to imaging servers, etc. Ignoring flaws in the security system can lead to loss of important logistics data and this will eventually lead to the slowing of business operations.

Another thing that companies must keep in mind is keeping a check on product tampering. The solution to this is providing seals on the products to keep a track of the product's status at each handling stage.

6. Lack of good relations with vendors

While selecting vendors for distribution, a business owner must conduct a thorough study on the performance and public relations of vendors. The most common mistake that is committed by business owners is falling prey to the idea of low prices.

Instead, look for vendors who not only offer a negotiable price for your products but also don't hesitate to offer other solutions to any logistic issues. This kind of relationship is key to better employee performance and improves efficiency.

7. Incompetent customer service management

Before starting any business, a person must have a solid understanding of the customer needs and the requirements of developing customer service policies. These are a few of the most crucial elements of logistics management.

Many companies miss out on opportunities by not focusing on customer needs. They may know what their customers need, but they don't have a system to get customer feedback about their supply and thus fail to employ methods to improve their performance.

Incorporating logistics activity in consumer service surveys would help businesses realise what their customers find lacking or satisfactory about their service in logistics.

Effective customer service management helps in improving the supply chain and logistics management by:

Building a cohesive experience across all lines in the supply chain
Being focused on boosting engagement
Providing numerous ways for consumers to contact you
Finding logistics providers that honestly partner with your business

These were some of the mistakes your business can avert while dealing with logistics. These also answer the question “how to reduce logistics costs?” as avoiding these costly mistakes will also help in increasing profitability.

Also Read:

1) Things You Should Consider if Starting a Business During Lockdown
2) 10 Things to Check Before Starting an E-commerce Website
3) How to Answer the Phone Professionally at your Business?
4) How a Good Market Research Can Give You a Steady Start?

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FAQs

Q. What kind of questions must a business owner ask a logistics provider, before joining hands with them?

Ans. Questions like, "What products do you support?", "What are your pricings?", "What is the location of your warehouses?", etc. must be asked by the business owner before bonding with a logistics provider for business.

Q. What are the three main activities of the logistics system?

Ans. The three main activities of the logistics system include processing of the order, management of inventory, and freight transportation.

Q. What skills are necessary for logistics?

Ans. Skills such as being customer-focused, solution-oriented, meticulous, conflict management, etc are necessary to work in logistics.

Q. What is the difference between 3PL and 4PL?

Ans. The essential difference between 3PL (third party logistics) and 4PL (fourth party logistics) is that a 3PL provider concentrates on the day-to-day procedures of your supply chain logistics, while a 4PL provider focuses on optimising your whole supply chain. Another difference is that a 4PL behaves as a single point of contact in the supply chain, but a 3PL supervises only certain facets of the supply chain.