What is Logistics?
Wikipedia said that logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet requirements of customers or corporations. What companies do is they plan their transportation path of products they sold and brought into a supply chain or a transport they can use over and over to shipped their goods to them or their customers. It is very important for companies to make use of logistics to manage the location of their products in transport as part of their supply management.
Logistics Cost, though very important, is sometimes the most neglected when planning your online business. This is the process which your product is stored, transported and delivered to your customers. Focusing on your website(E-Commerce Platform); thinking how it can attract more visitors and buyers, online promotion or increasing your online presence are as important as checking on your logistics from time to time.
What does it include?
Transportation – Road (truck), Rail (train), Sea (Ship or Barge), Air (Airplane)
Packaging – should not damage the product throughout the path to its destination
Security – protection from cargo theft
Taxation – tax risks and tax fraud
Now, we have an idea what it is logistics cost and what it covers. A lot of methods can help your supply chain process be better. It can range from developing your inventory levels, review better shipping companies, creating a process to improve your relationship to a 3PL and many others. Over the years it has evolved as evident on the image below:
Image from here.
The 1960s – retails stores got their stocks directly from wholesalers
The 1980s – Start of distribution centers
The 1990s – Logistics gained popularity
The 2000s – E-commerce emergence equates to automation for distribution
How can an online store owner save time and money on logistics cost now that they have evolved? A typical company will spend half on logistics, another half for the supply chain system regularly. You have to take in consideration that cost of logistics are influenced by fuel pricing, government policies, tariff laws, the cost of warehouse and shipping overseas. For international shipping there are international trade laws too, typically package coming overseas should be delivered in ten to fifteen days, it is only about 10% in transit. The remaining 90% it will be in a warehouse together with other boxes waiting for customs checks and other paperwork. All these in place, let’s see how managing logistics cost more efficient for your business pocket.
Tips for managing your Logistics Cost
Using an Inventory management system will save you a lot of time and money; it will do the groundwork for you. It will help you track inventory, orders, sales, and shipment. All of the information you need is saved online, which means you can track it easily. Some of the best Inventory Management system are Zoho Inventory, Orderhive, TapHunter; you can find more on this website. Though you will be spending in getting a system it will save you by making your transactions efficient. As much as you can, automate, and choose the appropriate tools to manage complex details, it will save you time and money.
Know your inventory
In order for you to have a better supply chain management, you should conduct a regular audit for your warehouse. It will help you be more efficient because you can locate, and ship your product in the least amount of time. You must have warehouse efficiency to know if you are using your space wisely if your goods are stored in a place where it is easy to access. It’s okay if you are using a spreadsheet for record keeping but having an automated system will make this much easier. The information you need will be kept automatically on the management software or system so you have quick access to inventories on hand. Always on the lookout to find errors and immediately solve it.
Partner with suppliers
If you are selling physical products, most probably you have suppliers. Allow your suppliers to partner with you for cost reduction at times suppliers shoulder the logistics expense. Keep in mind that you should consider your supplier’s locations. When you start your marketing plan you must target not only customers in the area but also suppliers. It will give you price advantage rather that getting suppliers that are not from the area and have higher shipping costs.
Treat them as your partner, they can help by working with you by being creative on a cost reduction process.
Find a shipping partner
Most online marketplaces have their own logistics services, they can offer it to you as long as you sign up with them, but for standalone websites, it’s important you make an effort to find a shipping partner. You can choose from shipping companies from this website. One other thing that you need to discuss with them is reverse logistics. Returns are very important for your business, and it is a must to provide a free returns policy. You must talk to your shipping partner about it and the processes related to it by doing regular audits.
These are a few things you can do to make your logistics more cost efficient. Managing logistics cost can be very hard but follow these tips to give power to your business to have fast and efficient operations.