Reducing transportation logistics cost is synonymous with efficient supply chain management, but savings on supply chain deliveries is only a possibility once all aspects of the supply chain have been assessed. Typically, ocean freight is just 30% of your total supply chain costs. Inefficient handling of the shipping processes or excessive focus only on ocean freight while being lax with other aspects often results in importers ignoring possible hidden costs. These costs can be found through careful evaluation and taking a top-down approach to the logistics process.
Faulty assumptions can also lead to these costs being overlooked. Most hidden costs are variables, meaning that they can be nullified or minimized through careful decision-making. An effective supply chain management system can illuminate these areas.
Let’s look at some of the common hidden costs and how you can stop leakage of your revenue.
Poor supply chain management equals to suboptimal logistics
One of the key aspects that leads to hidden costs is poor supply chain management. Solving this starts with finding the right logistics partner, as selecting the correct logistics mode is the first step to ensure cost reduction.
Every logistics company has multiple carrier options. Depending on the ease and urgency of delivery and associated shipping costs, it may make sense to transport the goods by train (if available) rather than by sea or even land routes. Supply chain issues can be solved through utilising every aspect of the logistics partners’ network. As such, a cargo shipping company with unrivalled access to sea routes doesn't need to send goods using ships only. An end-to-end logistics provider that has operational scale and the right technology can help you optimise routes. For example, if you have an urgent delivery, the logistics company can arrange for your consignment to be ferried by train if there’s a station close to you. Or take an instance where you have to deliver cargo (such as PPE equipment) on expedited basis: your logistics partner should be able to reroute delivery through air.
Strategic partnership immediately brings in efficiency and obviously reduces costs as well, solving overall supply chain issues with innovative solutions. At every juncture or each sub-milestone level, by optimise the internal logistics mode strategically, cost saving actions can be enacted.
Fixing undesirable contract terms grants an efficient supply chain management
One common error made by new importers is falling prey to contract terms that may be defined as unjustifiable and therefore, less desirable. This mostly happens when the importer tries to optimise the logistics division to fulfil increased business needs.
Even importers who have been in the business longer, can forget to check the fine print, and end up paying a price for their oversight. Efficient supply chain management and business growth happens smoothly when you have favourable pricing terms and conditions. As a new player in the realm of the importing business, working with integrated logistics partner, you can work on better contract terms, as your partner is backed by depth of experience and innovative technology. As a more experienced company, you can still find favourable solutions with an integrated logistics partner, especially in a time of upheaval and change.
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Less visibility in transactions, less agile logistics
When your focus is exclusively on timely delivery and optimization, you may not be paying as much attention to other components of your supply chain. This may also arise from a lack of visibility into other components. For instance, you may not have a clear line of sight on when your delivery arrives or if you need additional warehousing space. This leads to wasted funds and wasted time.
At times, you may incur more on your cargo landing cost, a variable that is usually missed out or miscalculated due to lack of visibility, insufficient evidence, and lack of information. Delays can worsen this. You may not be able to resolve complex supply chain issues, and this is where a logistics partner with state-of-the-art technology can extend visibility to every component of your supply chain, helping you eliminate bottlenecks in the supply chain.
Inefficient routing equals to revenue leakage
Suboptimal routing is often a hindrance, given the multiple variables that cause supply chain issues. Inefficient routing, when not rectified at the outset, can lead to revenue leakage that is often greater than the cost outflow. Route optimisation, if done regularly, leads to logistics companies choosing the most efficient route possible to deliver goods, leading to lower transportation costs. Well-entrenched and experienced logistics providers can strategically tackle route optimisation, keeping in view real-time events and issues that may cause routing problems. Experienced logistics players can meet the urgency of your import requirements with technology-backed solutions that provide you with the right intermodal transportation and route optimisation.
Inadequate communication creates ineffective cooperation
Where there is a lack of communication, there is inefficiency. Communication between the buyer and seller (in this case the importer and exporter) plays a pivotal role, and without it, the impact is immediate and detrimental to the entire supply chain. From discrepancies in the materials listed in the invoice compared with those received, or lack of visibility regarding the arrival of the cargo, or inadequate information on the documentation required to process delivery, your problems start to multiply when there is no free-flowing communication. Further, the return to cost ratio in case of new technology use is higher than when processing through manual requests. This is where your integrated logistics partner can assist; by having a single partner logistics vendor, your flow of communications is streamlined. All stakeholders are aligned, and communication moves from being reactive to proactive.
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