How to Reduce Costs in the Current Logistical Climate

logistics containers

The adage, “Don’t worry about the things you can’t control, rather worry about the things you can control”, could not be truer, given the challenges faced today by any company involved in the supply chain.

The Current Climate

With rising container costs and shortages in labor, storage and other resources, all companies are in the same boat (no pun intended).  Since there is no short-term solution to the problem, what can companies do to cut costs and come out ahead of their competitors?

The answer to this challenge may be right before your eyes, given the shift on how businesses have had to operate in the past year. With the restrictions placed on everyone due to COVID-19, companies had to pivot quickly and shift to remote working.  Many old school ways of doing business were challenged, and in the end, surprisingly, many companies found an increase in productivity and a decrease in operating costs. 

Fixed operating costs in a company can rarely be reduced, except by divesting of certain interests, downsizing staff and other assets.  According to the Harvard Business Review, this is not the right course of action if a business is seeking to come out ahead of their competition. In today’s logistics environment, another fixed cost, container prices, is also something that cannot be controlled. Therefore, the only course of action is to reduce variable costs. 

The Solution

To reduce variable costs, we look at 4 Pillars that can have a compounding positive effect on company profits: operational efficiencies, agility, increased customer retention and reduced compliance cost risk. Three out of these four pillars, interestingly enough, are directly related to data and the digital transformation.  

Digital transformation is the use of digital technologies to optimize operational efficiencies, business culture and the customer experience. Data plays a huge role in the digital transformation, because data allows your company to identify trends, current and potential bottlenecks and be proactive with changing market and customer demands. In the logistics world, trace tracking, such as J-Trak by Juno Logistics, and Entry Insight, also by Juno Logistics, are just two examples of a part of the digital transformation.  Data and the digital transformation, also allows for a company to be Agile, or rather respond quickly to changing market demands. This, in its simplest form, saves a company valuable time, and therefore money, when forced to pivot. 

With regards to reducing compliance cost risk, think of this like insurance.  It is not a matter of “if” we need it, but rather “when” we will need it.  The cost of non-compliance has risen by 45% since 2011 and has cost businesses an average of $14.8mm annually. This variable cost can be mitigated through brokerage consultations, thereby potentially reducing your liability, should your company be audited. Non-compliance is a cost that cannot be projected but can be avoided.

Finally, the three pillars: increased operational efficiency, increased agility, and reduced compliance cost risk, along with data and the digital transformation, work hand-in hand with increasing customer retention.  It is common knowledge that it is much cheaper to keep customers than to find new ones. Therefore, by using data and technology to increase the supply chain visibility for your customers, you are essentially helping them become more efficient and more agile.

Mindset Change

The final caveat in this equation is that a digital transformation takes time and resources. The time and money spent on building the infrastructure, as well as the time to realized ROI (Return on Investment) can be greatly reduced by utilizing a 3PL provider, such as Juno Logistics, that already has the digital foundation in place.  The technology, processes and knowledge are already in place, thereby giving your company a competitive advantage in the marketplace without the outlay of a large amount of capital.

The sooner you start to transform your supply chain thinking from “getting from Point A to Point B” in the cheapest way possible to “getting from Point A to B” in the most agile and efficient way possible, the sooner you will start to capitalize on unrealized gains and come out ahead of your competition.

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