How logistics companies can reduce transportation costs

Transportation costs can be a large part of Logistics companies’ budgets. Reviewing data can help you make cost-effective business decisions. The more data you have, the more efficient your business can be at saving money and becoming more profitable. For example, transportation costs can be massively reduced by making a few simple changes to your process.

We have discovered what the main transportation costs are and outlined what you can do reduce them.

What are the main transportation costs?

Many things can contribute to the spiralling spend of logistic companies, such as poor service, planning, decision making and unexpected costs. Transportation costs can be a significant part of logistics budgets and spending, and this is where you can make lasting changes by bringing the costs down to more manageable levels.

The good news is there are many ways you can bring the transportation costs down. And as the industry continues to evolve, this will continuingly change as new technologies and systems are found to modify logistics.

How to reduce your transportation costs:

Consolidate your deliveries

If you use carriers for your deliveries, consolidating shipments allows you to combine several orders so that one vehicle can deliver to one region in one ride. The less-than-truckload (LTL) shipment is an economical option for smaller weights. And if you consolidate a large shipment of all buyers in one shipment, you would save cash using full load shipping (FTL).

Use different modes of transport

You need to consider what is the cheapest and easiest option is for your deliveries. If your carriers mostly rely on vehicles such as vans and cars, you will need to consider what type of vehicle will be able to deliver the most amount of deliveries for little cost. For example, lorries work well for delivering large goods, whereas smaller vehicles such as vans and cars are good for individual everyday parcels.

The mode of transport taking into consideration of location and time to travel will help to reduce costs.

Invest in Logistics Software

New and emerging technologies can save you money on your transportation costs. 60% of logistics managers from 6 countries consider their software tool to be of poor quality that needs improvements and reorganisation. New systems can automate routine tasks and calculate employees’ salaries, bonuses and what jobs they have selected. Some include a rating feature which allows co-workers to rate one another. This means you can see employee’s performance and relationships within the team.

The main benefit of the software is to see the data. This gives you visibility and knowledge to see where your business can make improvements and if transportation costs can be cut.

Review your Fleet Insurance

Insurance is likely to be the biggest percentage of your transportation budget, and it doesn’t need to be. You can reduce the cost by reviewing your fleet insurance on an annual basis. Use this time to check you aren’t overpaying and have the correct amount of insurance cover. Otherwise, it can get expensive.

You may need to consider adding Public Liability Insurance to your existing policy. This covers you when dealing with members of the public or employees from other businesses. It also includes any damages made by you to the property of another business premises whilst dropping off a delivery.

Manage employee performance

Keeping customers happy by adding value through customer service while still delivering items on time will help to reduce transportation costs. You can measure your employee’s service by gathering customer feedback to see what can be improved, which can considerably reduce your costs.

Keeping the cost per order of logistics low is a key requirement for keeping your customers happy and to keep them working with you. Being able to go beyond the customer's expectation will help keep business up and spread out the burden of logistics cost reduction over a high number of orders or customers.

Continuing to review these areas and looking at new and modified ways of running your logistics business will help reduce costs. New technologies and systems are continuing to evolve to solve these problems. On top of this, you should also consider forming partnerships with other suppliers to help keep costs down. It’s best to continually review your existing budget and spend to be able to attempt to make savings each year.