Since the past few decades, there has been a significant battle recorded for the Consumer packaged goods (CPG) companies in regard to acquiring the market share and space on the retail shelves. For having the advantage of costing terms, companies are now heavily relying on CPG logistics operations and as per the course of such circumstances price pints are a key factor in this battle of market acquisition and different ways to reduce logistics cost.
As a fortunate course of events, incremental improvements are being recorded these days in the existing distribution processes. The employable ways of managing logistics strategies and managing shipping strategies have been debunked and contribute to the current processes in regards to retail capture and targeting customers. To do, logistics cost management is an essential concept to understand here. The perfect balance of newly formulated strategies that are optimal, and offer the potential boost for gaining profits and cost savings have been now discovered effectively.
These strategies are targeted especially for mid-tier suppliers who are struggling against the big brands. Before we go further on understanding multiple ways to reduce logistics costs in consumer goods distribution, let’s get the concept of consumer goods distribution and logistics costs involved in the same, clarified.
What are logistics costs in consumer goods distribution?
Consumer distribution happens at various levels or tiers. There are multiple channels through such kind of distribution takes place. When it comes to bringing the two concepts of consumer goods and distribution and logistics, there is a significant course of activities that can be linked together. Any form of distribution will primarily have logistics as its basic activity.
Same for consumer goods distribution as well, logistics plays a very vital part. For small players in the market, logistics costs overlapping the costs of distribution or manufacturing have become a very big challenge. Logistics being a crucial procedural activity for distribution cannot be negated at the same time. Thus, finding ways to curb logistics costs have become very essential for small and middle distribution enterprises.
6 Ways to reduce logistics cost
Here are a few of the most important ways or strategies on ways to reduce logistics cost:
Unite with Shippers on Loads for Logistics Costs Reduction
While missing out on large freight volumes, small enterprises can leverage using higher costs that are less in an amount in regards to truckload (LTL) shipments. Being one of the primary ways to ways to reduce freight costs, consumer products goods’ companies can be competently in the playing field of the market by having load consolidation with other CPG firms.
In some cases, there have been instances of doing the same with competitors thereby targeting the same targeted customers. The smart shift from LTL (less than truckload) to lower costs, and full truckload initiates to move, it does not just contribute in reducing freight rate but also bears responsibility for your share of the lower-cost move. Considered to be a great strategy, many enterprises have deployed this and carry on handling consumer goods clients with an ideal position retained in the market.
Data Integration from Sales and Fulfilment Systems
Specifying available inventory against the list of current orders leads to chaotic situations and troubles that are hard to manage. The problematic aspect of this situation is that even technological advancement, in terms of having an automated programmed algorithm, is also not existent to process the subjective decision. Leading to more errors, this decision-making process calls for personal bias since customer service executives and sales representatives may direct available inventory to their current set of in-house customers. To overcome this challenging situation, integration of data in regards to the sales and inventory is a great strategy.
However, this can have some limited repercussions on small-sized companies since they are allocated with limited systems resources. Since this strategy has been one of the best ways how to optimize transportation costs, many companies have already leveraged in integrating data from multiple systems from experience and resources thereby expediting decisions that are to be made.
Another vital thing to note under this context is that companies can combine valuable knowledge about their retail customers and can have decisions made based on customer priority. Doing this, the potential threats of disappointing key customers based on the “first-in, first-out” model can be simply avoided.
Standing out effectively as a productive way of reducing logistics costs for small and mid-sized CPG companies, the cross-docking method can help in moving the just-in-time inventory model. Since it’s a proven strategy, multiple CPG companies have been using this and continue to do so to fetch some productive results. The cross-docking method requires three essential factors to be ticked;
- Visibility must be given to inbound freight and factory production
- Advanced systems to combine orders with inbound freight
- Coordinate with carriers in an effective manner
Companies having the accessibility to insights and analytics can quickly deploy cross-dock strategy, thereby effectively knowing about the steps that can be taken to reduce cost in the transportation of inventory.
Product Packaging in Distribution Centre
As an obvious fact, retailers will never agree for the selling of products in its configured form before leaving the factory. Although, in respect to certain markets, factory finished products are required in various quantities in a pack, or with altered configuration altogether. Many of the currently exiting customer production goods companies ships their products directly from their respective distribution centers to firms handling the outside packaging, this is primarily done to get back the product to the same distribution center.
However, doing this leads to an escalation of freight costs and can hamper the company to miss out on visibility to the product at its packaging stage. Eliminating these errors can be done by executing secondary packaging services and other related product configurations at the operating distribution center. As per an estimation is done on how much savings can be acquired from doing this, a revelation of 10%-15% savings was found out based on data showing reductions in inventory, freight costs and damage.
Reduction in Chargebacks
Big sized CPG companies have in-house departments who would look after the chargebacks and also monitoring them at the same time. However small and mid-sized enterprises lack the potential resources to cast their focus on chargeback reduction and compromises on accepting them at the cost of running the business. For such enterprises tying with big sized CPG companies can be a significant move in gaining chargeback reductions.
Companies that are shipping out to multiple CPG manufacturers have knowledge about their retailers’ requirements and can monitor outbound shipments for assuring compliance. Such inputs can also contribute to gaining the data to validate the charge and support penalty challenges.
Virtual Logistics Capability
With globalization in its full form, consumer product brands have partnered with multi-billion dollar companies who can provide them with the advantages of having use of supply chain synergies. This has led to stiff competition for small and mid-sized CPG companies.
However, making agreements with the correct and credible logistics partner for consumer goods distribution can make a significant shift in your business dynamics. They can leverage you in playing safely in the market with facilities of a big company logistics without the overhead burdens.
Thus, now that you have a broad idea on how to reduce logistics costs in consumer goods distribution, make sure to take the full advantage to help the business run fruitfully in the global market. In case you wish to know how to calculate logistics costs in India, you may refer to the supporting blog from here. Get all the details regarding logistics costs and how the calculations are redone today.