Logistics cost reduction can feel overwhelming—so many moving parts and endless pressure to cut expenses.
There’s one simple approach that can make a big difference, and it’s often overlooked.
Watch the video below to find out!
Logistics costs are a headache for many organizations right now. With rising expenses, tight resources, and flatlining sales, supply chain and logistics leaders are feeling the pressure. And when senior executives demand cost reductions, it’s easy to feel overwhelmed by the sheer number of areas you could target.
But here’s the good news: there’s a straightforward approach you can focus on to make a significant impact without spreading yourself too thin.
The Complexity of Logistics Costs
Take a moment to think about the various components of your logistics costs: procurement, inbound transport, warehousing, inventory, outbound delivery, and customer fulfillment. It can feel like juggling 20 balls in the air at once. Inevitably, something will fall.
So instead of trying to tackle everything, narrow your focus. Over 30 years of consulting, I’ve found one area that consistently helps clients reduce costs: analyzing the cost of servicing customers.
Focus on Order Size and Frequency
Specifically, this means looking at your customer order profiles—order size, frequency, and value. Most companies have a classic bell curve: some large orders, some very small ones, and an average in the middle. The small orders are where inefficiencies hide.
Why? Smaller orders often cost more to process and deliver than they’re worth. If you can encourage customers to increase order size and reduce order frequency, you’ll make headway in cutting costs.
Start by identifying these costly small orders. Then, calculate the potential savings if you doubled their size or halved their frequency. It’s common to find customers placing tiny, frequent orders—sometimes multiple times a day.
Making It Work for Customers
Worried about pushback? Many customers are open to negotiation if you present a win-win. For example, offer a discount or free delivery if they meet a minimum order value or reduce their delivery frequency. Frame it as a cost-saving partnership.
Ready to Start?
If you’re not sure whether this is a problem for your business, try a quick self-audit. In just three minutes, you can uncover whether smaller orders are eating into your profits.
Just visit this link: Supply Chain Profit Leak Audit
Related articles on this topic have appeared throughout our website, check them out:
- How to Improve Warehouse Layout Efficiency and Save Costs
- Energy and Labour Costs: 2 Top Warehousing Challenges
- Cost to Serve Analysis—And the Costs of Neglecting It
- 12 Smart Ways to Reduce Your Freight Costs
