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How to achieve sustainable cost savings in logistics through technology

Jonas Mehrhoff
| September 6, 2021 |
4 min read

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Key Points:

 

 


  • Logistics and transportation costs account for up to 10% or more of the total costs of a product
  • Manual processes and repetitive tasks affect productivity in logistics and increases costs
  • Technology has the potential to unlock $4 trillion in value for the industry
  • Investing in technology has become a necessity to achieve sustainable cost savings

 

Logistics activities including shipping and freight have enabled globalization over the years. As globalization evolved and grew, so did the cost of transportation of goods. Transportation services, which were available easily and at a low cost in the past, have become scarce and expensive currently owing to huge demand in the market.

In any organization, operational costs are one of the biggest cost elements, of which, logistics and transportation costs can easily account for up to 10% or more of total costs. One of the modern mechanisms to control costs is the effective use of technology.

 

 

Technological advances in the logistics sector

The evolution of modern technology has been pushing the boundaries in logistics and supply chain and has made a big impact in recent decades.

 

As per the World Economic Forum, while digitalisation is fundamentally disrupting the logistics industry, it also has the potential to unlock around $4 trillion in value for the industry by 2025.

 

Technology has changed many aspects of how companies operate and manage their logistics and supply chain. Digital capabilities and fitness are fast becoming a prerequisite of a company’s success and being able to compete at the highest level to secure new business and cover new markets.

Technological advances such as those listed below have taken the industry to levels never imagined.

  1. IoT
  2. Advanced Data Analytics
  3. Automation & Robotics
  4. Blockchain
  5. Cloud
  6. Digital Platforms
  7. Artificial Intelligence
  8. Machine Learning
  9. Drones and UAVs

 

Technology-min

 

Achieving cost savings through digitalisation

Logistics and supply chain is very labour-intensive and labour cost is a critical cost element in any organization. The industry has been notorious for its manual processes, many of which are repetitive and requires a lot of labour.

A good starting point for cost savings is to deploy technology that can assist the company in reducing and avoiding repetitive tasks. Many of these repetitive tasks like route planning or the picking process in a warehouse can be automated using AI technology which can help in the reduction of costs.

One of the repetitive tasks that the industry is notorious for, is the amount of paperwork involved. Shippers can easily get lost in the plethora of documentation that they have to complete for each shipment. Digitisation of logistics documentation can help in not only cutting costs but also avoid costly errors which can wipe out a fair portion of the profits for the shipper. Advanced data analytics and automation help in reducing costs of many activities such as managing inventory levels, forecast and demand planning. This helps the company not only to achieve gains in terms of productivity but also to use that time and cost saved, to focus more on developing business strategies and enhancing client service.

The new technologies available in the market are changing the business and cost model of companies and are creating a dynamic pricing model which helps in optimising capacity utilisation. Technology allows clients to collect vital data on the movement of their cargo allowing them to arrive at the right decisions and conclusions about the shipments of the company. With a wide variety of technological solutions available in the market, shippers can have their pick to assist them in the decision-making process and to balance cost vs service for all their shipments.

 

Visibility-min

 

Achieving cost savings through real-time visibility

Real-time visibility can save costs, especially for e-commerce and fulfilment shippers. Through real-time visibility, shippers can identify the current status of the shipments. This helps them plan their order placement in good time and avoid storage or expedited shipments.

Although globalisation has brought about many new opportunities it has also brought about some complexities. For effective global trade transactions, knowledge of regulations, customs duties, taxes, inland costs, fuel-related surcharges, currency rates and other accessorial fees in destination countries is important. Currently, shippers may be working without this vital information as this information may not always be clear and available.

TMS and ERP systems can be of special benefit to shippers and can provide comprehensive real-time information for example about the status and location of shipments and charges at destination. While these systems are not new or novel, they are fast becoming integrated, essential, and smarter for the effective movement of goods.

 

 

More and more shippers are turning to visibility platforms to assist them to uncover and control cost inefficiencies such as

  • Billing;
  • Haulage calculations;
  • Load management;
  • Dispatch costs.

 

TMS also allows shippers to identify, select and vet the best carrier in terms of costs, service levels, industry rating, and load tracking. By monitoring these metrics, companies can be proactive rather than reactive in setting up control measures and tightening up their accounting and cost reconciliation processes. Such processes are critical to increasing a company’s bottom line and avoid losses. By automating and digitizing processes, companies can optimize freight spend, reduce hidden costs and unbudgeted costs such as demurrage, detention, and storage.

For shippers, maintaining a low per order cost is of utmost importance for improving their bottom line. A fully integrated technology platform takes out the guesswork and instills confidence in the logistics processes being followed.

 

Achieving cost saving through client satisfaction

 

 

Through investment in proper technology and the effective use of the same, companies can

  • Win business;
  • Improve client engagement;
  • Save on client acquisition and management costs.

 

Technological integration between different systems provides soft benefits such as enhanced client service, reduction of manual interventions. These can assist shipper in reducing errors which leads to additional costs and assist them to sign on new business without taking on additional staff.

The speed with which a shipper is able to respond to the requirements of the business and market is fast becoming a big selling point. Shippers require a fair amount of technological prowess to achieve this and to be able to compete in the current market. Ensuring client satisfaction will allow companies to retain clients and allow them to spread the operational costs across a wide range of clients. Using the appropriate technology, companies can manage complexity, provide supply chain visibility to their clients, and continually improve operational efficiencies.

 

Key take away

Technology has become a key differentiator in logistics and supply chains and is fast becoming a critical aspect in reducing logistics costs.

 

 

Using modern technology, shippers can

  • Make strategic changes to their operation;
  • Reduce the cost of operation;
  • Provide real-time visibility to their buyers;
  • Increase client satisfaction and engagement; and
  • Improve the bottom line of the company.

 

Currently, the demand for technology integration in the logistics sector is at an all-time high with more and more technology companies and solutions entering the market. As supply chains evolve and grow, investing in technology has become a necessity to achieve sustainable cost savings. The business of logistics involves a high level of collaboration and planning and a company that is digitised and technologically empowered can implement and execute its plans and achieve cost savings at the same time.

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