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How To Reduce Logistics Costs In The Distribution Of Consumer Goods

Many consumer package goods companies find it a challenge to strike the right balance in their business. With ecommerce booming, consumers are increasingly placing smaller orders at greater frequency, and while you need to meet these growing demands, you need to keep a handle on logistics costs as well.

Getting the equation right is particularly difficult for small and medium scale companies. They lack the systems capabilities, freight volumes, and resources that their larger rivals utilize to drive efficiencies.

CPG Logistics Solutions For CPGs

Many companies in this situation work with third-party logistics companies that specialize in these aspects. Liaising with these providers can help smaller companies significantly reduce costs without making any major capital investments.

If you are a mid-sized consumer packaged goods company, here are some ways in which you can use third party logistics provider services to be successful in your endeavours to cut costs and increase your profitability:

#1 Consolidate freight loads

You can reduce costs significantly by consolidating loads with not just shippers but with competitors too. Smaller companies tend to rely on less-than-load shipments which cost more because their freight volumes are generally much smaller. The one way that these companies can level the playing field is to consolidate their shipments with other companies that are moving goods to the same end customers.

This shift to full-truck-loads reduces the freight rates, but you need to make sure that you’re responsible only for your portion of the overall lower-cost move. If your company handles a large number of consumer goods, that puts you in a good position to implement this strategy.

#2 Cross-Docking Solutions

This is another way in which you can switch to an inventory model that is built on a just-in-time strategy. This model is time-tested but not many companies use it because it can be a little difficult to manage. In order to cross-dock effectively, you need:

  • Visibility of all the factory production as well as inbound freight.
  • Detailed coordination with carriers
  • Advanced systems in order to combine orders with inbound freight

Smaller companies lack the resources as well as the systems to manage this complex process effectively. The right third-party providers, on the other hand, will have the knowledge, specialised facilities, and systems required to design a cross-dock strategy which can help reduce logistics costs.

#3 Package Products At The Third-Party Provider’s Distribution Centre

Most retailers sell their products in configurations that are different from that which leave the factory. In certain markets, there may be a demand for different product configurations or different quantities in the packs. This customization generally happens at outside packaging companies after which the products are returned to the very same distribution centre.

This means the company loses visibility of their products while they are being packaged and it increases freight costs too. However, you can eliminate these problems by ensuring that product configuration and secondary packaging are handled at the same third-party logistics provider’s distribution centre.

Choose Your Third-Party Logistics Provider Wisely

When you integrate packaging and distribution functions you can achieve savings of 10%-15% based on reductions in inventory, damage and freight costs. Partnering with an efficient and reliable logistics partner is one of the best ways to level the playing field. It gives you the kind of logistics capabilities that big companies have, but without any of the overheads.

For effective and sustainable cost reduction opportunities & efficiencies that will increase your bottom line, contact the experts at Benchmark Cost Solutions at this number – 02 9525 0777. If you prefer, write to us at this email address, and we will revert quickly.

Thanks for reading,
Benchmark Cost Solutions Team
02 9525 0777