Until recently, most businesses had fixed arrangements with logistic service providers that relied on ld-fashioned metrics and ordering techniques. Freight routes, shipping costs, warehousing – these values were fixed and inflexible.
But with big data and the internet, it’s now possible to be more creative about how goods are handled. Companies look for opportunities to do merge-in-transit and diverting of goods to save time and warehousing costs.
In fact, a 2016 PwC report predicts that as warehousing solutions become more sophisticated, logistics service providers will become more IT-oriented. Technology suppliers may offer logistics services based on their own expertise, whether that be using drones, robotics or automatic routing.
Here’s how the cost of freight and storage can be minimised by establishing special relationships with logistic service providers.
The cost of transporting goods
Whenever you send out an item to a customer, you are incurring an expense that drives up cost. It can either be included as a separate freight charge or included in the cost of goods sold (COGS). Either way, it drives up the cost and makes your stock less competitive.
According to an IDC report, transportation and logistic service providers costs as a percentage of sales range from 9% to 14% depending on the business. To reduce these costs, alliances between logistic services and businesses are becoming commonplace.
Strategic transport alliances
These alliances are strategic relationships, not just relationships born out of habit. The parties in a typical agreement are:
• A logistic service provider
• A producer of goods
Together they design a system that gets products to customers reliably, quickly and cheaply.
With the decline of locally manufactured products, logistic service providers are now becoming more important in the supply chain. Customers now expect to be able to buy a laptop from Shanghai with the same ease as going down to their local computer store.
To make this possible, logistic service providers bring to the table solid relationships with customs officials, both at home and in the country of manufacture. Supply bottlenecks become a thing of the past.
Alternative outlets for excess stock
The same costs apply if you have to move excess or unwanted stock to an auction centre or discount warehouse in an effort to offload it. So instead of moving excess stock around looking for buyers, why not let the buyers find you?
This can also be done through Industrial Clearance. Stock is listed on the site and once it’s sold through the website, goes out directly to the customer.
In this way, retailers have an additional way of moving stock that minimises breakages, delivery times and lack of availability.
In the same way alliances are built with logistic service providers, building a relationship with an alternative outlet for stock can be beneficial for business owners.