The question that every e-commerce business always ponders: “How can you reduce logistics costs without sacrificing service quality or customer satisfaction?”
If an e-commerce business wants to achieve success, you definitely have to consider ways to reduce your logistics costs. However, how can you reduce this cost without sacrificing service quality or customer satisfaction?
Fortunately, most of the after-sales costs can be minimized through proper logistics planning, informed decision making, and the right 3PLs to support the business. Here are the Top 10 strategies to help reduce supply chain costs, increase operational efficiency, and improve customer satisfaction.
1. Improve customer satisfaction
If you are an e-commerce retailer, the first thing you should do to reduce logistics costs is to improve overall customer satisfaction. The happier your customers are, the stronger your long-term profits will be.
How to improve customer satisfaction? Start by taking steps to reduce cart abandonment and increase your average order value.
One of the most important issues e-commerce retailers face is cart abandonment due to high shipping costs. It’s also the reason many e-commerce businesses choose to keep costs low or allow free shipping altogether.
To reduce abandonment rates and increase average value, you can incentivize shoppers to spend more through the minimum spend threshold method to share with initial shipping costs.
2. Minimize delivery time
If your warehouse is in Florida but your customers are in California, your business incurs thousands of dollars in unnecessary logistics costs each year. You’ll be able to allocate resources much better by outsourcing warehousing and fulfillment through a 3PLs in California. These services will help you deliver products to customers in less time and for a lot less money.
3. Centralized purchasing
The same optimization can also be applied to the enterprise’s purchasing process. It is much more efficient to source materials from a supplier near your manufacturing plant than to ship the same materials across the country.
4. Consolidation of shipments
If you send partial shipments to the same location each week, it is far more efficient and cost-effective to combine multiple partial shipments into one full shipment. This process can minimize the total load you pay, thereby reducing your shipping costs to the minimum required.
5. Focus on making decisions based on available information
You can be the best logistics analyst in the world, but you can’t reduce logistics costs without making informed decisions. How do you know where there is excess logistics spending if you don’t have the data to see where you are incurring excess costs.
A warehouse management system (WMS) or a transportation management system (TMS) can give businesses the data they need to identify inefficiencies. At the same time, reduce excess spending and improve operational efficiency across the supply chain.
6. Automating warehousing and logistics processes
Warehouse automation technology such as automatic storage and retrieval system, automatic transportation. Modular racking systems and warehouse robots that enable logistics and logistics businesses can save significantly more time, effort and resources.
7. Deployment of 3PLs
You can implement the strategies above and see your logistics costs actually drop in a matter of months; or you can start outsourcing logistics and warehousing and use 3PLs (third party logistics providers) to reduce logistics costs immediately.
3PLs not only specializes in logistics, they also maintain a larger network of warehouses, fulfillment centers and other logistics providers. This is to provide a wide range of fully customized services, business intelligence and end-to-end logistics solutions.
8. Use preventive maintenance
If you want to cut unnecessary costs on any equipment then preventive maintenance is another way to reduce the cost of logistics optimally and simply. Because emergency maintenance or maintenance when the problem has happened is really not beneficial. Incidents that have occurred will cause costly work, customer support, even fatal accidents: for example, the container is being unloaded and the forklift stalls.
9. Keeping customers happy
One of the best supply chain cost reduction techniques is to exceed customer expectations. Businesses should keep logistics support costs extremely low for each order that will keep customers happy. From here, companies can keep up and manage the enormous burden of cost reduction across the supply chain that they have adopted.
Because of the high correlation between customer satisfaction and overall cost reductions, customer service also needs to be evaluated and tailored to accommodate innovations in logistics costs.
10. Make better use of available storage space and increase stock density
You need to clearly define and try to take advantage of all the space. Always look for ways to increase storage density in bins and racks by improving vertical space utilization. This will also reduce damage to the boxes by preventing them from moving during transit.
Also, try to make better use of the available storage space to increase storage density. Attempts to encourage organized activities that are directly related to labor, asset efficiency, and inventory accuracy.