10 Tips For Reducing Supply Chain Logistics Costs As companies continue to manufacture and source materials from overseas,

controlling costs remains a top priority for those involved in international trade. One key factor that should be monitored more closely is logistics management, which covers all activities relating to the procurement, transport, transshipment and storage of goods. Depending on the industry sector, supply chain logistics costs account from 5% to 50% of a products total landed cost. Some issues effecting logistics costs: Fuel prices remain high and ports continue to experience delays, resulting in higher transportation fees. Increasingly complex international trade laws and security measurements threaten to lengthen delivery times and increase warehousing costs. According to a recent report by TechnologyEvaluation.com, a typical airfreight shipment takes eight to twelve days. Of this, the cargo is en route only 5% of the time. The rest is spent sitting in warehouses waiting for the required documents and compliance checks. Following are 10 Tips on Reducing Supply Chain Logistics Costs: 1. Understand the true costs of sourcing overseas. Calculate freight, duty, brokerage, and inventory carrying costs to support these lengthened supply chains. Also factor in such items as the costs of engineers flying overseas. Once you understand the true total landed cost and total impact to the business, that domestic buy may look a lot better. Sourcing from Ohio to your U.S. plant, distribution center or customer may, in the long run, be more cost effective than sourcing from China. 2. Focus on eliminating the variability out of transit times. The more variable the transit times are, the more likely it is that the receiving party is using more premium freight, building buffers of inventory, or ordering more often and more quantity than necessary to compensate for the uncertainty. Understanding these dynamics can lead to the conclusion that paying higher freight costs to insure higher variability actually saves your company in total costs. 3. Tariff engineering. Strategically source and manufacture products to take advantage of classification duty rates and eligibility for special trade programs such as NAFTA. 4. Consolidate. If you have multiple suppliers in one country, consolidate their goods into one shipment. In addition, if you always have LCL (less

than container load) shipments out of one country, try to find another LCL importer of goods from that country. You may be able to partner and consolidate to a more cost-effective FCL (full container load) shipment. 5. Informed decision-making. Provide to the decision-makers/customers of your logistics network the cost of freight for each service level, the reliability of each lane for each service level, and the true cost of carrying inventory so they can make informed decisions. People generally want to be good corporate citizens and will select the less expensive option that still meets their needs. 6. Sometimes insurance doesnt pay. Often when a company has a shipment of premium goods they tend to use the Carriers Insurance. Carriers Insurance is very expensive. If the company is self insured, which most companies are, they should check their insurance policy to see if it covers shipment of goods. If it does, then they do not need to add the extra cost of Carriers Insurance. 7. Automate compliance processes. Companies that implement software solutions to automate trade compliance are able to speed the cycle times associated with tasks being performed manually, such as document preparation, and eliminate the associated errors. Automated compliance procedures also bring fewer delays at border crossings, resulting in ontime delivery, adequate inventory levels, increased customer satisfaction, and the avoidance of fines. 8. Control your express shipping costs. Typically when a company runs into a supply chain issue, it will have an entire shipment sent on an express/expedited (highest cost) service level basis. Panicking often results in higher costs. If the company would just do a little bit of calculating it can determine the amount of goods that are needed immediately and have that amount sent using express/expedited service level, while the balance of the shipment can be sent using a standard (lower cost) service level. 9. Planes, trains and automobiles. Which is cheapest? In general, rail is more cost-effective than trucking or air. Water is cheaper than air shipment. No matter the mode of delivery, always try to get three quotes for movements. 10. Be aware of non-tariff trade barriers. Companies need to be more aware of the increasing level of non-tariff trade barriers that are in force to reduce sweat shop labor and support human rights and animal welfare

issues. These restrictions can bring importers increased liability and compliance costs

Logistics is the management of the flow of goods between the point of origin and the point of use in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and often security. Logistics is a channel of the supply chain which adds the value of time and place utility. Today the complexity of production logistics can be modeled, analyzed, visualized and optimized by plant simulation software, but is constantly changing. This can involve anything from consumer goods such as food, to IT materials, to aerospace and defense equipment. Origins and definition The term logistics comes from the Greek logos (), meaning "speech, reason, ratio, rationality, language, phrase", and more specifically from the Greek word logistiki (), meaning accounting and financial organization[citation needed]. The word logistics has its origin in the French verb loger to lodge or to quarter. Its original use was to describe the science of movement, supplying & maintenance of military forces in the field. Later on it was used to describe the management of materials flow through an organization, from raw materials through to finished goods[citation needed]. Logistics is considered to have originated in the military's need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, military officers with the title Logistikas were responsible for financial and supply distribution matters[citation needed]. The Oxford English Dictionary defines logistics as "the branch of military science relating to procuring, maintaining and transporting materiel, personnel and facilities." Another dictionary definition is "the time-related positioning of resources." As such, logistics is commonly seen as a branch of engineering that creates "people systems" rather than "machine systems". When talking in terms of human resources

management, logistics means giving inputs, i.e. "recruiting manpowers", which ultimately work for the final consumer or to delivery. According to the Council of Logistics Management, logistics contains the integrated planning, control, realization and monitoring of all internal and network-wide material-,part- and product flow including the necessary information flow in industrial and trading companies along the complete value-added chain (and product life cycle) for the purpose of confirming to customer requirements. [edit] Main logistics targets Logistics is one of the main functions within a company. The main targets of logistics can be divided into performance related and cost related. They are high due date reliability, short delivery times, low inventory level and high capacity utilization. But when decisions need to be made, there is always a trade off between these targets. This is what makes being a logistician challenging and interesting. [edit] Logistics viewpoints Inbound logistics is one of the primary processes and it concentrates on purchasing and arranging inbound movement of materials, parts and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses or retail stores. Outbound logistics is the process related to the storage and movement of the final product and the related information flows from the end of the production line to the end user. [edit] Logistics Fields Given the services performed by logistics, one can distinguish the main fields of it as it follows:

Procurement Logistics Production Logistics Distribution Logistics After sales Logistics Disposal Logistics

Procurement Logistics consists of activities such as market research, requirements planning, make or buy decisions, supplier management,

ordering, and order controlling. The targets in procurement logistics might be contradictory - maximize the efficiency by concentrating on core competences, outsourcing while maintaining the autonomy of the company, and minimization of procurement costs while maximizing the security within the supply process. Production Logistics connects procurement to distribution logistics. The main function of production logistics is to use the available production capacities to produce the products needed in distribution logistics. Production logistics activities are related to organizational concepts, layout planning, production planning, and control. Distribution Logistics has, as main tasks, the delivery of the finished products to the customer. It consists of order processing, warehousing, and transportation. Distribution logistics is necessary because the time, place, and quantity of production differs with the time, place, and quantity of consumption. Disposal Logistics' main function is to reduce logistics cost(s), enhance service(s), and save natural resources. [edit] Military logistics Main article: Military logistics In military science, maintaining one's supply lines while disrupting those of the enemy is a crucialsome would say the most crucialelement of military strategy, since an armed force without resources and transportation is defenseless. The defeat of the British in the American War of Independence and the defeat of the Axis in the African theatre of World War II are attributed to logistical failure.[citation needed] The historical leaders Hannibal Barca, Alexander the Great, and the Duke of Wellington are considered to have been logistical geniuses. Militaries have a significant need for logistics solutions, and so have developed advanced implementations. Integrated Logistics Support (ILS) is a discipline used in military industries to ensure an easily supportable system with a robust customer service (logistic) concept at the lowest cost and in line with (often high) reliability, availability, maintainability and other requirements as defined for the project. In military logistics, logistics officers manage how and when to move resources to the places they are needed.

Supply chain management in military logistics often deals with a number of variables in predicting cost, deterioration, consumption, and future demand. The US Military's categorical supply classification was developed in such a way that categories of supply with similar consumption variables are grouped together for planning purposes. For instance, peacetime consumption of ammunition and fuel will be considerably less than wartime consumption of these items, whereas other classes of supply such as subsistence and clothing have a relatively consistent consumption rate regardless of war or peace. Troops will always require uniform and food. More troops will require equally more uniforms and food. Some classes of supply have a linear demand relationshipas more troops are added more supply items are neededas more equipment is used more fuel and ammunition is consumed. Other classes of supply must consider a third variable besides usage and quantity: time. As equipment ages more and more repair parts are needed over time, even when usage and quantity stays consistent. By recording and analyzing these trends over time and applying to future scenarios, the US Military can accurately supply troops with the items necessary at the precise moment they are needed.[1] History has shown that good logistical planning creates a lean and efficient fighting force. Lack thereof can lead to a clunky, slow, and ill-equipped force with too much or too little supply. [edit] Business logistics

A logistics provider's warehouse of goods being stacked on pallets with a forklift. Logistics as a business concept evolved in the 1950s due to the increasing complexity of supplying businesses with materials and shipping out products in an increasingly globalized supply chain, leading to a call for experts called supply chain logisticians. Business logistics can be defined as "having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer", and

is the science of process and incorporates all industry sectors. The goal of logistics work is to manage the fruition of project life cycles, supply chains and resultant efficiencies. In business, logistics may have either internal focus (inbound logistics), or external focus (outbound logistics) covering the flow and storage of materials from point of origin to point of consumption (see supply chain management). The main functions of a qualified logistician include inventory management, purchasing, transportation, warehousing, consultation and the organizing and planning of these activities. Logisticians combine a professional knowledge of each of these functions to coordinate resources in an organization. There are two fundamentally different forms of logistics: one optimizes a steady flow of material through a network of transport links and storage nodes; the other coordinates a sequence of resources to carry out some project. [edit] Production logistics The term production logistics is used to describe logistic processes within an industry. The purpose of production logistics is to ensure that each machine and workstation is being fed with the right product in the right quantity and quality at the right time. The concern is not the transportation itself, but to streamline and control the flow through valueadding processes and eliminate nonvalue-adding ones. Production logistics can be applied to existing as well as new plants. Manufacturing in an existing plant is a constantly changing process. Machines are exchanged and new ones added, which gives the opportunity to improve the production logistics system accordingly. Production logistics provides the means to achieve customer response and capital efficiency. Production logistics is becoming more important with decreasing batch sizes. In many industries (e.g. mobile phones), a batch size of one is the short-term aim, allowing even a single customer's demand to be fulfilled efficiently. Track and tracing, which is an essential part of production logisticsdue to product safety and product reliability issuesis also gaining importance, especially in the automotive and medical industries. [edit] Logistics management Main article: Logistics Management Logistics is that part of the supply chain which plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and

the point of consumption in order to meet customer and legal requirements. A professional working in the field of logistics management is called a logistician. Logistics management is known by many names, the most common are as follows:

Materials Management Channel Management Distribution (or Physical Distribution) Business or Logistics Management or Supply Chain Management

The Chartered Institute of Logistics & Transport (CILT) was established in the United Kingdom in 1919 and was granted a Royal Charter in 1926. The Chartered Institute is one of the professional bodies or institutions, for the logistics and transport sectors, that offers professional qualifications or degrees in logistics management. [edit] Warehouse management systems and warehouse control systems Main articles: Warehouse management system and Warehouse control system Although there is some functionality overlap, the differences between warehouse management systems (WMS) and warehouse control systems (WCS) can be significant. Simply put, a WMS plans a weekly activity forecast based on such factors as statistics and trends, whereas a WCS acts like a floor supervisor, working in real time to get the job done by the most effective means. For instance, a WMS can tell the system it is going to need five of stock-keeping unit (SKU) A and five of SKU B hours in advance, but by the time it acts, other considerations may have come into play or there could be a logjam on a conveyor. A WCS can prevent that problem by working in real time and adapting to the situation by making a last-minute decision based on current activity and operational status. Working synergistically, WMS and WCS can resolve these issues and maximize efficiency for companies that rely on the effective operation of their warehouse or distribution center.[2] [edit] Logistics outsourcing Logistics outsourcing involves a relationship between a company and an LSP which, compared with basic logistics services, has more customized

offerings, encompasses a broad number of service activities, is characterized by a long-term orientation, and, thus, has a rather strategic nature.[3] [edit] Third-party logistics Main article: Third-party logistics Third-party logistics (3PL) involves using external organizations to execute logistics activities that have traditionally been performed within an organization itself.[4] According to this definition, third-party logistics includes any form of outsourcing of logistics activities previously performed in-house. If, for example, a company with its own warehousing facilities decides to employ external transportation, this would be an example of third-party logistics. Logistics is an emerging business area in many countries. [edit] Fourth-party logistics Main article: Fourth-party logistics The concept of Fourth-Party Logistics (4PL) provider was first defined by Andersen Consulting (Now Accenture) as an integrator that assembles the resources, capabilities and technology of its own organization and other organizations to design, build, and run comprehensive supply chain solutions. Whereas a third party logistics (3PL) service provider targets a function, a 4PL targets management of the entire process. Some have described a 4PL as a general contractor who manages other 3PLs, truckers, forwarders, custom house agents, and others, essentially taking responsibility of a complete process for the customer. [edit] Emergency logistics Emergency logistics is a term used by the logistics, supply chain and manufacturing industries to denote specific time critical modes of transport used to move goods or objects rapidly in the event of an emergency.[citation needed] The reason for enlisting emergency logistics services could be a production delay or anticipated production delay, or it could be that specialist equipment is needed urgently to prevent instances such as aircraft being grounded (also known as "aircraft on ground"-AOG), ships being delayed, or telecommunications failure. Emergency logistics services are typically sourced from a specialist provider.[citation
needed]

[edit] As a profession A logistician is a professional logistics practitioner. Professional logisticians are often certified by professional associations. One can either work in a pure logistics company such as shipping line, airport or freight forwarder or within the logistics department of a company. However, as mentioned previously, logistics is a very broad field encompassing procurement, production, distribution and disposal activities. Hence, the career perspectives are very broad also. A new trend in the industry are the 4 PL - consulting companies offering logistics services. They hire students with a BA or MA in International Logistics. Some universities and academic institutions train students as logisticians, offering undergraduate and postgraduate programs

Distribution Transport - Rising Costs The Credit Crunch is hitting transport and distribution operations very hard, reduced volumes but still having to deliver the same routes for customers. The best way of maintaining profits in these circumstances is to reduce operational costs, by working smarter and not harder. We are specialist logistics cost reduction consultants and have the industry knowledge and skills to help you minimise the effect of the current situation on your business. Distribution Logistics Cost Reduction "Never a better time than Now" Customer deliveries and associated distribution costs keep rising, fuel, drivers hours costs to name a few just keep going up and up. Customer do not want to pay more for the products, therefore margins are reducing. Our cost reduction programme is tailored to both In-house fleets and businesses using 3pl contractors, the issue are the same. Some Questions you may be asking about your current transport & distribution operation? Is our delivery routing & scheduling optimised? Do we have the right number, types & mix of vehicles? Are our depot's and our 3pl providers depot's in the best location? Are we getting the best cost & service from our fleet or our 3pl contractors? What can we do when our volumes per drop are reducing, and the numbers of times a customer wants a delivery is increasing?

The fact is that many businesses who use 3pl contractors never look at these factors, take it from us, the contractor will have his own in-efficiencies, and you will be paying for them in your exiting rates. In-house fleets suffer from the same issues.

Logistics cost form an important part of the overall cost structure in any organization. Focus needs to be on renegotiating freight and shipping rates, reduction in overall freight costs and streamlining operations.There are six best practices that can be followed by most businesses to reduce costs. New carriers: Constant market rate check is a best practice. Usually, logistics managers get into a comfort zone with the existing carriers. This leads to cost creep. Market rate check will bring to light other more economical operations. New carriers may be more flexible in their quotes. Freight costs: There are several options to optimize freight costs. Renegotiation of minimum billing to a minimum for a zone needs to be explored. Product delivery coordination is another useful tool to streamline freight costs. Today both the USPS and Canada Post offer viable options for small packages. Arrangements with a number of smaller local carriers sometime s provide the best rate/best service combination. Internet offers excellent tools for comparing and optimizing freight costs Improve shipping and receiving: Streamlining shipping and receiving practices will offer substantial savings. This can happen through reduction of window time for receiving. Starting point should be mandating delivery appointments. A flow chart needs to be made of all the operations to determine wasteful processes and combining existing processes. Technology: Internet tools enable substantial reduction in paperwork. Documents are scanned and emailed to customs, ports etc. In case of cross border trade, documents needs to reach at least twenty four hours in advance to avoid delays at the border. Technology also allows coordination of all shipments to optimize loading. Managing returns: Reverse logistics is an important element of freight costs. Most companies offer a liberal returns policy. If the customer is not satisfied with the product, it can be returned in 30, 60, 90 days depending on the seller. At times, the seller also arranges to pick it up. To minimize costs associated with reverse logistics processes needs to be streamlined. Audit of freight costs: Use specialized agencies that provide post payment audit of freight bills. These agencies are usually paid on a profit

sharing basis. These audits also provide valuable insight into patterns and other cost reduction opportunities. Easwar has an extensive knowledge of issues related to currency,exchange,taxes,cost savings ideas and loves to write about it. For additional resources please visit