Logistics add between 5% and 50% of a product’s total cost, once you have considered procurement, shipment, and storage. For companies who rely on international trade, controlling these costs becomes an important goal of management.
Factors That Impact Cost
Fuel prices and transportation delays are two main factors in the cost of logistics. The length of time it takes for delivery has been increasing in recent years due to changes in international trade laws and security measures. The average cargo shipping time is from eight to twelve days, but only 5% of that time is the product actually in transit. The remainder of the time it is sitting at an intermediate point awaiting paperwork.
What is Measured Gets Managed
If the professionals in your logistics network are made aware of the cost of freight and inventory they will be better informed to make the right decisions. Software is available that can easily prepare documents and assess the use of space at various facilities simultaneously. Automated compliance procedures can help your company avoid delays at international borders, increase on-time deliveries, and maintain appropriate levels of inventory.
Keep Your Cool
Getting nervous about shipments and supplies often result in poor decision-making. Companies frequently request express or expedited shipping of large orders anytime a problem occurs, which leads to much higher costs. It is a far better practice to take the time to decide what needs to be on hand immediately and only have that amount sent by express freight.
Maintain Supply Chain Visibility
Managers have a natural tendency to keep safety stock on hand in case of the unexpected. This excess in inventory is an unnecessary expense and can be reduced by ensuring managers have full visibility across the logistics supply chain. Problems and disruptions can arise any day, but when managers can quickly access information about alternate sources of supply, they can act with more confidence and are less likely to create buffers.
Supply chain management (SCM) requires effort, but should not become crisis management. Following a few easy guidelines should keep your operation running smoothly and efficiently.
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