Nitin O Mahipal, Chief Executive Officer and Managing Director, Mega Pack & Carry writes about the logistics costs required to support goods suppliers.

Logistics companies are the organisations that take care of the end-to-end movement. From the point of origin to the end for any products or services which reach your doorstep. The logistics services cover various areas of expenditure like transportation, packaging, handling, labour/driver management, related overheads, technology, and so on. The freight rates are decided by the logistics company before the operations are conducted by the carrier. Freight rates are generally an amount paid for the transportation of the bulk or a package of goods. The freight rates which ultimately have to be borne by the ultimate customer put budgetary pressure in many ways on the manufacturer of the goods. To stay competitive in the market, the logistics cost also needs to support the supplier of goods.

Barriers that led to rising fuel prices

For every part of the logistics operation, the companies need to cash out. Be it packaging, storing, weighing or transporting the goods, all the expenses have to be met to put your product on the shelf. The two great barriers from 2020 – the Covid-19 pandemic and then the emergence of war between Russia-Ukraine has led to sky-rocketing fuel prices. With the rising price of fuel, running the whole logistics operations by airways or roadways is costing the companies an arm and a leg. Now, every company’s biggest challenge is to tame the rising logistics cost, especially in large geographies like India.

Few things that will majorly help logistics companies reduce operational costs

Turning to electric transport

If any organisation wants to reduce logistics costs, it must divert the focus to technology and automation. A well-designed automated system can remove discrepancies and wastage from the execution of logistics, making the process leaner and quicker as opposed to the traditional ways.

Electric vehicles should be considered an option as soon as they are available. They are an immediate solution and a greener option that can save the company from both spending huge amounts on diesel and are good for the planet too. So, choosing electric vehicles can turn out to be a great option for companies to cut operations costs.x

Rising inflation and fuel prices are huge hindrances to growth. In the last two years, the global situation has dipped the GDP of economies and has led to a rise in fuel prices. With fuel costs overtaking profits, more and more companies are considering a switch to electric vehicles.

EVs are cheaper than ITC vehicles and save fuel costs permanently. However, the EV charging infrastructure in India is still in the development stage. An increase in state-wise policies is giving way to creating a decent infrastructure. It won’t be long before EVs are used for long-distance transport through the availability of an EV charging station network.

Similarly, automation is helping companies save on employee pay and improve operational efficiency. The benefits of automation are varied and it allows for faster and quick processes. Some of the things you can invest in are:

• Resource planning software
• Warehouse management system
• Transportation management system
• Real-time inventory management software and more

Using Intermodal transport

Along with EVs, the logistics company also has one more option which is intermodal transport. Intermodal transport uses a large sum of containers and swap bodies and many other multiple forms of transport. With that, they don’t need to rely on just one form of transport. Additionally, this form of transport is credited with environmental benefits. It prevents carbon dioxide particulate matter and nitrogen dioxide emissions. Moreover, this also reduces fuel consumption. So, whichever transport does not make use of fuel is a boon to the logistics organisation. Thus, intermodal transport is another beneficial option.

Pricing by weight

Weight is a major factor that decides the price. The more the weight of packages, the higher will be the transportation cost. Logistics companies should give the most suitable option to the shippers as per the weight and volume ratio of the goods that are transported. The correct selection of truck type can reduce the logistics cost immensely. If the cargo weight is not sufficient to occupy the capacity of the truck, it would be economical if you book through a Less-Than-Truckload [LTL] service provider. However, these will not be dedicated trucks for one’s cargo.

Utilising an automatic container loading system

It is also important to shed some light on the cost incurred for loading and unloading through manpower separately. The count of labour will not be minimal, it will be maximum for sure. Paying wages to many labourers will turn out as a white elephant for logistic agencies. Instead of disbursing so much on labour, it would be more efficient if the operation is functioned by an automatic loader. By utilising automatic container loading machines, the company will not need to pay a bunch of labourers. Therefore, the automatic loaders will help to reduce the overhead and increase individual productivity and decrease the head count.

Supervising maintenance strategies

The logistics firms should perhaps focus more on their maintenance. If the trucks are well-maintained, they will probably earn a sufficient sum of money. The reason why maintenance is important is that some customers look for stain-free and damage-free products. Cleanliness is pivotal. If the trucks are well maintained with no tear, trust is built which helps in more customer loyalty. Customer satisfaction is linked to the drastic reduction in cost. For great maintenance, we should consider Preventive Maintenance Contracts (PMC) that plan the checklist well in advance and will invariably reduce the number of off-road days for a truck.

Developing an effective connection with suppliers.

The company should coordinate with suppliers to reduce costs because the suppliers/vendors are masters of the trade. They have good knowledge and can assist by suggesting good ideas to the logistics department. Therefore, logistics organisations should always have a great bond with their suppliers. The freight rates have risen by an average of 20 per cent from the pre-pandemic level to today in most industrial hubs in India.

Being transparent and considerate of your customers

All the customers should be extended proper support from the company. They should exceed the expectations of the customers. This is because if you satisfy customer needs, they will be more inclined towards your services. In addition, the company should not delay in solving repercussions the customers come across while the service is being provided. The fast response gives the customer an impression that the company is active and caring towards them. Also, the delivery should not be short on time. The faster the service, the more the customer will stay in touch with services. Moreover, the communication with customers should be decent and polite to get a proper response back from them.

Conclusion

Running a logistics company is a challenging task. There are several expenses that you have to consider to keep the business running. Costs driving your operations may seem like a necessary evil, but a few above mention organisational changes can lead you to optimise your operations and reduce any unnecessary expenditure.