5 Logistics Cost Analysis Methods To Optimize Your Freight Spend

There are many logistics cost analysis methods to optimize your freight spend. Logistics cost analysis serves to reduce overall costs of a supply chain process. The top methods aim to find pieces of the process that can be improved upon to make a process more efficient. As someone responsible for the finances of your company, you should know the logistics cost analysis methods available to make your budget more effective. Whether you are transporting goods or commodities, you should follow an approach that reduces costs for your company. Read on to learn 5 logistics cost analysis methods to optimize your freight spend.

Gather Data To Identify Areas For Optimization

To begin, gather data as a logistics cost analysis method to identify areas for further optimization for your freight spend. All good analysis starts with good data. Use data easily accessible like bill of lading and customs data to begin. Consider adding API or TMS systems to gather more data on your processes. Freight analytic platforms are available to gather real time data for more visibility and agility in your process. This data will come in handy for all optimization methods. In short, identify areas for optimization with great data as a logistics cost analysis method.

Eliminate Errors In Distribution

Second, eliminate errors as a great logistics cost analysis method to optimize your freight spend. Errors cost money in every logistics process. Common errors in a system are likely due to systemic process issues. Evaluate your errors and differentiate between simple human error and more widespread issues. Develop a fool-proof step-by-step process to avoid costly documentation and data errors. Continue to invest in logistics software and automation for higher accuracy. Definitely, eliminate errors to optimize your freight spend.

Optimize Variables You Can Affect

Continuing, define variables you can and cannot change as a logistics cost analysis method to optimize your freight spend. Understand what resources you use in your process. Investigate how those resources are being used to gain a solid understanding of how your freight spend is being used. For example, the cost of gas is out of your control, but the total number of miles driven to complete a distribution cycle is up to your route planning or the cost of commercial trailer equipment. Consider expanding the capacity of your vehicles or restructuring route in this case. You can control several other freight spend variable like size, stops, and time. Of course, define the variables you can and cannot change as a logistics cost analysis method to optimize your freight spend.

Analyze Warehouse Costs

Then, focus on processes not directly involved in transportation as a logistics cost analysis. Some warehouses charge incident management fees in the event of an error. A shifting consumer model causes difficulties in managing your freight. Investigate how the product and its destination can become more consistent to maximize each freight load. Changing customer demographics can cause warehouse shortages that may cost extra trips. Warehouse mismanagement can also be siphoning your business’ cash. Optimize how, where, and what you’re delivering to cut costs further. Surely, optimize factors outside transportation as a logistics cost analysis method.

Reduce Last Mile Delivery Costs

After, reduce last mile delivery costs as a logistics cost analysis method to optimize your freight spend. Optimize your drivers’ last mile delivery routes to avoid spending unnecessary time and gas. Keep tabs on your drivers to ensure they’re following well planned delivery routes that don’t include personal stops. Investigate solutions for delivery failures that involve an unavailable customer. Develop a process to maintain your vehicles well to avoid costly unexpected breakdowns and safety issues. In summary, to optimize your freight spend, reduce last mile delivery costs.

There are several methods for logistical cost analysis to optimize your freight spend. First, gather good data to measure your logistic cost analysis method effectiveness. Then, eliminate errors that cost efficiency in your freight process. Next, identify and optimize the variables in your process that you can affect. Fourth, find areas to optimize outside your distribution leg. Finally, reduce your last mile delivery costs to optimize your freight spend. Use these 5 logistic cost analysis methods to optimize your freight spend and improve business.

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