Cost Optimisation

Streamlining Logistics to Minimize Cost-to-Serve

November 28, 2023

Reducing logistics costs is crucial for businesses aiming for long-term success and sustainable growth. Companies can streamline their operations by adopting strategies that optimize logistics expenses, enhancing efficiency and profitability. But before attempting to optimize it, getting an accurate picture of the cost for every customer and channel is critical. And unfortunately, not many companies are still doing it right. Some still rely on the older and more static KPI of Cost of Goods Sold (COGS). Companies that really understand their operations and costs have moved to a more dynamic and realistic metric, cost-to-serve. Here, we'll dive into how innovative logistics strategies can trim the cost-to-serve, making your supply chain leaner and agiler. 

Understanding Cost-to-Serve in Logistics

First, let's dive into Cost-to-Serve (CTS) in logistics with an easy-to-understand, everyday example. Think about planning a big backyard barbecue. It's not just about the cost of burgers and buns. You've got to think about everything – the food, decorations, music, and even those extra chairs you might need. Each of these adds to the total cost.

Now, in logistics, CTS is also like that. It's all about the complete view cost of getting your product into the customer's hands. This means looking at not just the shipping but also storage, handling, and all the little details like special packaging and long-distance deliveries that add up. Getting a handle on these costs sets your business apart and unveils many unknowns.

Now, let's jump into some of the strategies that can keep your CTS in check.

7 Logistics Strategies to Reduce Cost-to-Serve 

Now that we understand the importance of CTS better let's get to the juicy part. Here are the top 7 strategies that you can use to improve cost-to-serve and be more profitable in turn:

  1. Better Inventory and Demand Management:
  • Get smart with your stock. Use techniques like demand forecasting and safety stock optimization. This helps you keep just enough inventory, balancing service and cost.
  • Embrace Just-in-Time (JIT). This approach cuts down on holding costs by having items only when you need them, freeing up cash and reducing warehousing needs.
  1. Smarter Transportation and Routes:
  • Mix and match transportation modes. Combining truck, rail, and sea can save money and reduce handling.
  • Use route planning software. This considers traffic and distance, making your routes more efficient.
  • Plan routes wisely. This means less empty trips and fuller loads, saving fuel and money.
  1. Warehouse Efficiency through Automation:
  • Rethink your warehouse space. Using space better and automating with things like robots can make your operations smoother and faster.
  • Apply lean principles. Methods like the 5S system can cut waste and improve workflows.
  1. Strong Partnerships with Suppliers and Carriers:
  • Build solid relationships for better rates and terms. This leads to savings and better efficiency.
  1. Centralized Inventory Control and ABC Analysis:
  • Use a centralized system for better stock management. ABC analysis helps focus on what matters most, managing high-value items more effectively.
  1. Tech Integration and Data Analytics:
  • Tools like Transportation Management Systems (TMS) and real-time tracking improve visibility and efficiency. Analytics helps identify trends and inefficiencies for better decision-making.
  1. Continuous Improvement and Cost Monitoring:
  • Set logistics cost-related KPIs and regularly audit them. Encourage everyone to chip in with ideas for improvements. This creates a culture of constant optimization and cost reduction.

Understanding and implementing these strategies can really transform how you handle logistics, making your operations more profitable and efficient. It's all about being proactive and staying ahead of the game.

Holocene's Role in Streamlining Logistics

Let's talk about how Holocene can be your partner in making these strategies real-life success for your company. Here's what you get with Holocene:

  • Holocene suite of tools provides a complete overview of your operations. It's like having a hawk-eye view to spot where you can cut costs.
  • Holocene provides smart data and analytics options. Think of it as your Decision Support System (DSS) for making crucial or even tactical decisions. You'll know exactly when to restock and which routes are the best, saving you time and money.
  • Cutting-edge tech that automates your logistics and keeps it running smoothly while keeping costs down.
Streamlining logistics isn't just about saving a few bucks. It's about being clever, quick on your feet, and a little bit tech-smart. And with Holocene by your side, you're all set to face these challenges.

Think about it – you're not just improving your logistics but transforming it into something extraordinary and future-ready. Reach out to Holocene today and start your journey towards a more efficient, cost-effective supply chain. Let's make things happen together!