What are the methods and strategies of logistics cost reduction?

1.1 Carry out the quantitative decision-making of the total cost of logistics

Some logistics companies only notice the cost of transportation, storage, distribution and other single elements occurring, in fact, we must have a comprehensive control of the various elements in order to achieve the minimization of the total cost of logistics. The total cost of logistics is composed of transportation, storage and custody, circulation processing, packaging, handling, distribution and other elements of the cost. When the cost of the same time for the smallest total cost is also the smallest. However, due to the "benefit paradox" law, the cost of the general can not be minimized at the same time, it must be summarized for each link to coordinate and integrate, and strengthen the cost control of all aspects of logistics. As shown in Figure 1 to illustrate the solution to the minimum total cost of logistics.

The figure illustrates the storage costs, transportation costs and other costs (circulation processing, packaging, handling, distribution and other elements of the cost and management costs) and the relationship between the amount of storage, and when the cost of warehousing and transportation costs are equal to the time of the total cost of logistics is the minimum, can be obtained at this time of the amount of storage, so as to determine the cost of warehousing, transportation costs, and the cost of the specific value of the other costs.

1.2 Transportation rationalization

Transportation costs in the total cost of logistics accounted for a large proportion of the developed countries from the European point of view, generally accounted for more than 1 / 3, so the rationalization of transport is also an important method of reducing logistics costs. Transportation costs depend largely on the amount of transport (and storage) and mode of transport, according to the principle of minimizing the total cost of logistics to determine the appropriate amount of transport (from the amount of storage to determine the amount of transport), the amount of transport is established, the mode of transport to become the main factors affecting the cost of transport.

1.3 Rationalization of storage

Storage costs in the total cost of logistics also occupies a considerable proportion. According to the principle of minimizing the total cost of logistics to determine the appropriate amount of inventory. Under the conditions of the established inventory, in order to control inventory costs can be used in the method of ABC inventory classification; "first-in, first-out" method; container, pallet integration and other methods.

In addition to the above methods, rationalization of packaging and loading and unloading operations can also reduce logistics costs, such as avoiding insufficient or excessive packaging is likely to cause damage to the flow of goods in the process or waste of packaging materials; you can reduce the number of times of loading and unloading, shorten the distance of the handling to improve the loading and unloading activity to achieve the rationalization of the loading and unloading.

2. Strategies to reduce logistics costs

In addition to these specific methods, you can also take some measures to control.

2.1 Build a modern logistics information system

Enterprise informatization has become a necessity, enterprises should build a modern logistics information system, the use of high-tech to complete the whole process of logistics coordination, control and management, through the network to achieve the information **** to enjoy the full response to a variety of needs, the coordination of inter-enterprise cooperation has the potential to be completed quickly in a short period of time, which can be from the overall control of logistics costs. overall control of the possibility of logistics costs. At the same time, this establishes a strategic logistics management system, so that the cost of logistics activities mixed in with other businesses can be accurately calculated without transferring the cost to other businesses or sectors.

For example: Haier Logistics introduced a modern information system - ERP system, the original order from the customer to pass to the supplier needs more than 10 days, now 1 day can be completed, and the accuracy rate is very high, while the financial staff from the traditional financial work out.

2.2 Cost Reduction through Supply Chain Management and Management of Customer Logistics Services

Supply chain management requires companies to coordinate their relationships with other companies, customers, and transportation providers to achieve efficiencies across the entire supply chain activity. Therefore, the logistics department and other functional departments are required to strengthen cost control and improve logistics services to customers.

2.3 Reduce logistics costs by correctly handling returns

Returns cost is also an important part of the enterprise logistics cost, because returns will generate a series of logistics costs, and returns of goods are small, relatively decentralized, merchandise warehousing, bill processing and other operations are also very complex. As a result, cutting the cost of returns is a logistics cost control activities to pay special attention to.

At present, most enterprises have their own programs and policies to deal with returns, but due to the different policies of each enterprise, coupled with the operators are not familiar with it, so that the policy guidelines to deal with the return of goods can only be put on the shelf. Therefore, it is important for businesses to make their returns policies well understood. The Manhattan Partnership, a supply chain provider in Atlanta, GA, along with other software providers, has designed a new solution, the "Return to Vendor" model, which is able to incorporate all supplier return management policies into the program. For example, if a DVD manufacturer requires 20 DVDs to be returned at a time, that means the organization must put 19 on hold until the 20th arrives. However, the model can automatically generate a picking ticket, and can transfer the ticket to the warehouse management system; there are some foreign enterprises to take the "agile labeling" and other measures. Through these measures, most companies can avoid the cost of returns management problems.

2.4 Reduce logistics costs through logistics outsourcing

Enterprises can reduce logistics costs through logistics outsourcing, i.e., third-party logistics. Third-party logistics is a mode of providing logistics services by enterprises other than the supply side and the demand side, through the provision of a complete set of logistics activities to serve the supply chain. Although the development of third-party logistics is not a long time, but has a certain degree of maturity, can bring a lot of benefits to enterprises: to enable enterprises to focus on their own main business; cost savings, reduce capital backlog; reduce inventory; enhance the corporate image. It can be seen that the benefits of outsourcing is not only limited to reducing logistics costs, companies can also get many other improvements in service and efficiency.

The long-established enterprise Guan Sheng Yuan Group, with more than 3,000 outlets in Shanghai and operating out-of-town transportation, logistics management is a very important one. Relying on their own distribution and transportation costs are high and wasteful, for which they have implemented logistics outsourcing strategy. According to statistics, Crown Garden Group entrusted third-party logistics (contracted Hong Xin company) since the original railroad transportation of goods sent to Beijing in 7 days, now only 2 to 3 days, and the implementation of the door-to-door distribution services, only 5 months to save 400,000 yuan. Due to the timely and considerate third-party logistics distribution, so that the circulation of goods faster, the group's sales have increased. What's more, the leaders of the enterprise are freed from non-productive processes such as packaging and transportation to concentrate on the main business of production and better develop new products and improve quality.

In addition, enterprises can also improve the operational efficiency of the logistics distribution system through logistics standardization, such as the standardization of the pallet to reduce costs, or through the distribution of the efficiency of the transportation and purchase costs, which requires companies to pay attention to the management of the distribution plan to improve the loading rate as well as the vehicle operation and management; but also pay attention to the cultivation of human resources and so on.