Transporting Goods at Low Cost – 5 DEFINING WAYS
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TRANSPORTING GOODS AT LOW COST - 5 DEFINING WAYS
Road transportation plays an integral role in transport of goods as it is essential to intermodal transport, and is one of the most flexible and cost-effective modes transport. India has the second largest road network in the world, the first being USA with approximately 4.7 million kilometers of roads, and around 8 million transportation vehicles moving at any given moment.
About 6% of India’s GDP can easily be attributed to road transportation. Sadly, the road transport industries are affected by inefficient services and dangers such as, corruption, accidents and poor services. A key factor in all businesses is the equation of trust. Unfortunately, most companies do not have a good performance record of credibility and trust, specially with regards to providing new technological facilities like package tracking, route update, logistic management, and so on.
Another major issue that plagues transportation industry is maintaining the low cost and keeping it cost effective, while at the same time matching up to the needs of the market, and catering to the needs of both supplier and customer ends.
Current Market – Hindrances and Obstacles
A situation that often arises is that the retailer needs to transport smaller shipments at regular and quick intervals. At the same time, the transportation company demands that the overall price paid to the logistics, be kept at the minimum amount possible.
This becomes a challenge. It is particularly difficult for the mid-sized companies that lack various capabilities in comparison to their bigger competitive counterparts. Owing to a lack of investment of capital and other resources in the technological development of the business, mid-sized companies often have to settle for lower cost options, which in turn, effectively reduces productivity. Logistics Junction is a solution that makes up for the shortfalls, and lowers the overall cost of transportation services in India.
5 Defining Ways of Transporting Goods at Lower Costs
There are 5 key ways in which the overall cost of the goods transportation can be reduced effectively, while maintaining the overall productivity at an optimum level.
These are the 5 Roads to Cost Effective Transportation.
1. Consolidation of the loads with similar shipper to reduce overall logistics costs
Consolidating the loads amongst similar shippers is one of the most effective ways of bringing down costs. Most companies often lack large freight volumes that is large enough to occupy the full capacity of the hired truck. Hence a lot of space is wasted and the hired truck is not fully used. But the cost of the entire truck capacity is charged on the bill. This is a major disadvantage for the company. To tackle this challenging situation, and reduce cost, consolidating loads is helpful. However, consolidation of shipments must be done with similar shippers.
Material of the goods that is being transported is a key factor with regard to similar shippers. Similar type of goods require similar care and monitoring. For example, consolidation of shipments of glass related articles can be made only with the shipper who is transporting such delicate material, so that proper and specific care of such material can be done, and transportation can happen without damage. Mixing diverse types of shipment increases costs of managing and packaging, and risks damage.
Route of the transportation is another important parameter to be considered. Similar shipper needs to be on the same path of delivery, to make the collaboration profitable and cost effective. Round trips or multiple drop points make the delivery late and hike up the cost unnecessarily.
Lending out the space of their trucks to other smaller sized transportation companies, with similar shipping needs and same routes to be traveled upon, is a key strategy in bringing down costs.
This is also applicable when it comes to consolidation with competitors. Often the similar shippers are competitors. It is a good business strategy to consolidate goods with competitors as it is profitable for both, and a win-win situation for all.
2. Data Integration from Sales and Fulfilment Systems
Data inspection is an integral part of transportation industry. The process of inspecting the data plays a vital role in maintaining accuracy of records in logistics. Knowing and keeping a track of the available inventory, against the current orders, demands accuracy and must be precise, so as to not incur any loss. The best solution with regard to data integration and data inspection is a subjective decision. There is no real process for it and must be addressed intelligently.
One good solution is to create a better integration of sales and inventory data. This could be a challenge and a barrier for smaller transportation companies, with limited systems resources. However, many larger or mid-scale transportation companies have the requisite experience and resources to integrate data from multiple systems, to facilitate decisions. The company’s unique knowledge of the retail customer is of great help, as decisions can be made based on the customer priority and preferences, instead of a “first-in, first-out” model that risks disappointing key customers.
3. Freight Cross-docking
Another good option for small and mid-scaled companies to bring down transportation costs is cross-docking. Cross-docking enables the companies to move beyond a “just-in-time” inventory model. It is a tested and proven strategy, bringing in better results. Effective cross-docking requires:
- Visibility and transparency with regard to factory production and inbound freight.
- Combining High-end systems orders with inbound freight orders.
- Smooth, efficient and top-notch coordination with carriers.
Smaller and mid-scale companies require the right resources and technology to facilitate this process.
4. Product Packaging in Distribution Centre
Products are not sold in the same packaging as they leave the factory, or as the retailor receives them. Different markets have different requirements. Different quantities in a pack may be required for different market profiles, or different fashion of products altogether. Simply put, the product packaging and presentation goes through a complete revamp before hitting the market.
This customization of product distribution happens between the Distribution Centre and the Outside Third-Party Packaging firms. The product is returned to the same Distribution Centre, revamped in a different packaging, as per demand and requirement. This naturally increases freight costs, and also causes the company to lose visibility of the product during the packaging process, creating a challenge and a dark tunnel effect in the transportation chain.
The solution to this challenging situation is to do the packaging at the distribution centre itself.
The integration of distribution and packaging functions is of great advantage and unfolds benefits. Almost 15% savings are created, based on reductions in freight costs of movement of the raw and packaged material in between distribution centres and third-party packaging firms. The inventory is managed with greater visibility, and possible damage of the product that may occur during this process, is greatly reduced and can be completely avoided.
5. Reducing Chargeback Costs
Reducing chargeback costs is another key factor to bringing down costs of transportation of cargo. All large goods transport companies have dedicated departments that monitor chargebacks. However, small and mid-sized companies do not possess ample resources to monitor chargebacks and create processes for chargeback reduction. Hence small and mid-sized companies very often accept chargebacks as a cost that is necessarily incurred as part of business. A deal with the third party logistics provider plays a vital role for them, in this scenario.
Logistics transportation companies that ship for multiple manufacturers are aware of the requirements of the retailers, and can comfortably monitor outbound shipments to assure compliance. This information, accessed from such third party logistics companies, is valuable when accessing data needed to assure the accuracy of the chargebacks, and support penalty challenges.
Conclusion
It can be concluded that reduction of logistics costs can be achieved successfully with a virtual logistics capability. Implementation of various ideas, like consolidation and product packaging at the distribution centre itself, monitoring chargebacks, etc are vital to cost reduction in transportation.
Many big logistics companies like Logistics Junction, have become an integral part and partner of established larger companies that use supply chain synergies to increase their cost advantage and enjoy bigger profits. This kind of industry consolidation creates a vulnerability for small and mid-sized companies, making it difficult for them to compete in the markets.
Hence, partnering up with the right logistics provider, and implementation of certain solutions and strategies, helps to level the ground for the small and mid-sized companies, and provides an arena of a fair fight with the bigger companies. And also gives the smaller players a feel of the big company logistics capabilities, without incurring the cost that comes along with it.
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