Importance of Cost Reduction for Shippers

Shippers work in a tough environment. Cost pressures dominate, constrain and impact shippers – daily. But shippers have a lopsided preoccupation with costs. In its 2013 Annual 3PL Survey, InBound Logistics found that shippers’ number one concern is transport costs. Specifically, 63% of shippers said their greatest challenge is cutting transport costs. Meanwhile, business process improvement came in a distant second at 33%, followed by customer service at 30%. So how can shippers take a more balanced approach to cost reduction?

Cost Reduction Through Risk Mitigation

In a recent blog post, Joe Lynch keenly observed that logistics professionals focus on risk management. Joe suggested businesses focus on improving service, delivery times, and customer satisfaction. By mitigating risk in these areas, you’ll do business better, faster, and cheaper.

Now as you mitigate risk, take cost into account.  As you discover how to improve a key business process, attach a financial savings goal to it. For example, set an annual goal of, say, 5% for cost reduction. Sure that’s small, but it’s reasonable and achievable. Over time, small cost reductions add up.

Additional Benefits of Cost Reduction Through Risk Mitigation

But cutting costs by mitigating risk has other benefits:

  • Strategic focus – you’ll stop reacting to a transactional-based business.

  • Teaming for success – opens the door for working with carriers to improve business processes.

  • Growth through partnering – long-term partnerships lead to lasting and stable growth.

A strategic focus helps you develop performance measures. Using and tracking performance measures helps streamline business processes. Soon, you’ll perform more effectively and efficiently.

Teaming allows you to refine business processes even more. Enlist your carriers’ support by involving them in joint planning. You’ll achieve your goals faster with a concerted team effort.

Finally, continuous collaboration leads to lower costs over time. Steady, incremental improvements will eventually result in robust revenues. Increased cash flow and profits will help you grow your business.

Taking this approach is a game-changer. Instead of focusing obsessively on cost, focus on improving your business. First, look at improving effectiveness.  Then look at how to manage more efficiently. Price pressures won’t go away, so take some time to reexamine your business processes methodically. You’ll not only cut transport costs, you‘ll also become more competitive and grow your business.

What methods or practices do you employ to free yourself from the grip of daily cost pressures?

Alex Milo, , is a professional B2B Copywriter and certified in SEO copywriting. He’s also a Certified Professional Logistician through the Society of Logistics Engineers (SOLE). Alex has over 26 years of military and commercial experience in transportation and logistics operational, business development and customer service positions. He now spends his time consulting and writing B2B marketing content specializing in helping transportation and logistics companies generate leads.