A deep clean of your company’s operational logistics will usually reveal inefficiencies, errors, and costs that drain your bottom line. But in 2024, shipping logistics executives face a host of new and emerging factors that can significantly clog operations, like sustainability, labor shortages, and historic supply chain disruptions. It’s time to apply fresh strategies to sweep past these challenges and achieve super-efficient and cost-effective operations.

But there are other benefits to lean, clean logistics that go beyond productivity.  A comprehensive analysis of your logistics costs and operations offers critical insights that can be applied to improve forecasting accuracy and budgeting for the remainder of 2024 and into 2025. You can also strengthen your company’s resiliency and ability to adapt to today’s tough logistics challenges. Furthermore, the analytics process can reveal important opportunities and innovative ways to propel growth.

As a real-world example, a company that sells temperature-sensitive computer parts can benefit from a clean, lean logistics approach to:

• Expedite and optimize order processing, shipping, and delivery in the most cost-effective way possible.
• Manage inventory to avoid stocking issues and inventory loss.
• Store and handle delicate and temperature-controlled goods safely and securely.
• Manage facilities, operational systems, and equipment.
• Offer customers real-time tracking and delivery information.
• Adapt to supply chain disruptions, computer industry standards, compliance fluctuations, seasonal demand, and customer preferences.
• Assess and address waste, excess costs, and inefficiencies to improve profitability and productivity.
• Identify opportunities for expansion and innovation.
• Forecast and budget with greater accuracy and ROI.

To initiate a cleanup, start by identifying some of the top logistics costs in your business that can benefit from a comprehensive analysis and overhaul.

Transportation Management

Transportation costs and efficiency are often the focus of retail operations, and for good reason. The complexity and chaos of our modern supply chain affects the costs of fuel, labor, equipment, and insurance. Add the effects of volatile geopolitical, economic, and environmental factors, and things can get messy.

The solution that more and more retailers are turning to is a Transportation Management System (TMS). According to a survey by Peerless Research Group, 26% of businesses currently use TMS—and almost half of these TMS users report a return on investment (ROI) within 12 months or less.

A TMS automates key processes, including route optimization, Carrier choice, package tracking, and freight auditing. It keeps things clean by reducing manual errors and excessive charges. The most effective TMS programs also have robust analytics tools that can give your company a clear view of its shipping operations, enabling you to accurately target areas where costs and waste can be reduced, and processes can be streamlined.

With the global TMS market at $13.6 billion in 2023 and a projected CAGR of 17.4% from 2024 to 2030, businesses that want to remain competitive must adopt a strong TMS solution to automate the planning, execution, and optimization of their shipping logistics.

Another powerful way to clean up transportation costs is Carrier contract negotiation. Retailers typically save up to 30% in shipping costs based on a comprehensive contract analysis. Translate those savings to your own bottom line to determine if a contract negotiation offers the potential to cut transportation costs for your business.

Inventory Management

The emergence of cold chain logistics, complex new technologies, and consumer demand for super-fast delivery are just a few of the factors affecting inventory management for retailers in 2024. The costs to store and manage goods and materials are rising, along with the costs to insure and handle them.  

A key way to clean up inventory management costs is the use of predictive analytics. By analyzing data related to inventory operations, you can more accurately forecast and manage goods to prevent overstocking and out stocking issues and reduce lead time.

One innovative solution for managing inventory is LJM’s Profitability Tool for Online Retailers. This allows you to easily identify and quantify which of the products you ship are most profitable and which ones cost the most money in transportation charges. This data can also be used to optimize your product mix or shipping strategy.

Other current strategies for cleaning up inventory costs include just-in-time practices and inventory optimization solutions such as ABC analysis and EOQ models.

Warehouse Management

The warehouse is like the engine house that drives retail operations. Just as machinery with complex moving parts can get clogged and inefficient over time, warehouse operations require regular review and maintenance to ensure optimal productivity, functionality, and cost-effectiveness. And since we now operate in the digital age, the parts and processes involved in warehouse operations have evolved accordingly, requiring innovative strategies to manage technologically advanced equipment, computer systems, security, and other warehouse components.

The expense of operating and maintaining your warehouse includes costs for the facility itself as well as equipment for storing and distributing goods, labor, security, operating systems, and utilities.

Remember to consider the key factors that affect warehousing costs, including location, size, functionality, technology and equipment, and security. Are your distribution centers strategically located? What would be the potential cost savings of relocation? A Facility Rationalization Study will provide these answers and more, opening the doors to a new location and greater profitability.

To further strip down warehousing costs and boost efficiency, take a hard look at the benefits of an automated Warehouse Management System (WMS). These programs are designed to expose inefficiencies and provide optimal alternatives based on your warehouse location, size, and flow.

Administrative

Shipping logistics executives are masters of efficiency, and this applies to administrative operations as well. Administrative logistics focuses on the costs of planning, executing, and managing the company’s logistical operations, such as wages and benefits, education and training, and the resources needed to be effective—including logistics services, software, and tools.

However, factors within your organization can hamper efforts to adopt and implement cutting-edge logistics tools and technology. Surveys indicate that an increase in the utilization of advanced logistics solutions, and the resulting increase in profitability, correlate directly with executive level buy-in for the adoption of these solutions.

You can proactively address factors such as organizational structure, culture, and practices by providing incontrovertible data that supports the need for logistics services and the definitive ROI. This information is readily available through web-based Analytics and Reporting programs that provide a clear view of inefficient operations and excessive costs that are draining profits and damaging customer relations.

Packaging

Sustainability and green consumerism are transforming retail packaging. Over 60% of consumers will pay more for eco-friendly goods and 59% say they will change brands if they are not satisfied with a retailer’s sustainability efforts.

Fortunately, adopting sustainable packaging is one change that will have long-term benefits on your productivity and profitability. Sustainable practices are inherently designed to conserve energy, reduce waste, and save time and money.

Packaging costs go beyond boxes and eco-friendly bubble wrap to include costs for labor, equipment, and technology. The cost of packaging can also be affected by regulatory requirements and industry standards, as well as the product itself, which may require specialty packaging. For example, there is a burgeoning market for perishable goods such as food and pharmaceuticals which are often packaged in temperature-protective materials.

One of the best ways to keep packaging costs lean and green is through analytics and reporting tools that identify the most cost-effective package dimensions, weight, and processing methods.
And remember to use recycled and eco-friendly materials that reduce packaging weight and waste as well as environmental impact, a move that will boost your bottom line as well as your customer satisfaction.

Power Tools for Cleaner Logistics & a Brighter Bottom Line

According to a survey by McKinsey, the implementation of AI and tech-driven logistics programs have helped businesses cut logistics costs by 15%, improve inventory levels by 35%, and enhance customer service by 65%. In addition, over 70% of retailers plan to adopt or increase use of AI, web-based software, and other logistics technology by 2025 with a goal of improving their overall shipping and operational productivity and profitability. This means that a majority of your competitors are probably doing the same.

Furthermore, almost 39% of retailers are utilizing logistics advisory services and outsourcing complex logistics and analytics to specialists like LJM Group, which offer a comprehensive suite of solutions. The use of a professional logistics service is almost a necessity for businesses that are struggling to remain profitable while operating at maximum efficiency and sustainably.

Harvard Business Review provides a compelling case study based on a small but ambitious bleach company that leveraged logistics to reduce transport costs, improve efficiency and service, and significantly expand growth. Using data analysis, automated Transportation Management Systems, and tools like Geo Heat Map, they pinpointed the location of key material suppliers and bleach distributors with optimal shipping and delivery access—and the lowest transport costs. In addition, they were able to map the competition’s supply chain and strategically relocate to an area where they could dominate the market.

One of the keys to achieving growth in 2024 lies in harnessing the power of logistics technology to drive efficiency, reduce costs, and enhance customer experiences. As you create a work culture focused on clean, lean, and green logistics, the impact will be seen not only on your bottom line, but on your company mindset and brand image. By embracing data-driven decision-making and investing in automated systems and sustainability, retailers can position themselves for success in a highly competitive and fluctuating market.

SOURCES

McKinsey. Tech Enabled Transformations: Three Supply Chain Success Stories. https://www.mckinsey.com/capabilities/operations/our-insights/tech-enabled-transformations-three-supply-chain-success-stories

Grand View Research. Transportation Management Systems Market. https://www.grandviewresearch.com/industry-analysis/transportation-management-systems-market

Kuhne Logistics University. Alumni Q&A on Supply Chain Management in 2024. https://www.klu.org/article/alumni-qa-on-supply-chain-management-in-2024

Globe Newswire. Study Reveals Consumers Very Interested in Sustainable Home Delivery Services. https://www.globenewswire.com/news-release/2023/06/14/2687905/9197/en/Descartes-Study-Reveals-60-of-Consumers-Quite-Very-Interested-in-Sustainable-Home-Delivery-Services.html

Harvard Business Review. Logistics Essential to Strategy. https://hbr.org/1977/11/logistics-essential-to-strategy

eCommerce Germany. Top Insights About Logistics Trends in 2024. https://ecommercegermany.com/blog/top-insights-about-logistics-trends-in-2024