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Controlling operating costs is essential for the profitability of any business. And the expense of distribution can hit product-led businesses hard. So how can companies reduce their distribution costs?
It’s important to examine the whole supply chain, from the factory to the warehouse to the customer, to determine where efficiencies can be made. Distribution channels must also be agile enough to respond to any market changes to keep those efficiencies up-to-date.
How to Reduce Distribution Costs for your Business
Transporting goods from where they’re manufactured to the customer is often a multiple-journey process. How far and how often goods are shipped is one of the key factors that decide the distribution costs. But it’s not just the price of fuel that will have an impact; it’s the number of working hours too.
Whenever something is moved, the stock must be loaded, driven and unloaded. So two of the most effective ways to reduce distribution costs are to minimise movement and ship in bulk.
Transporting in bulk reduces distribution costs because it’s the most efficient way to move stock, which is why palletised distribution has become the industry standard. Upgrading your pallet and parcel movements from couriers to 3PL pallet networks is one of the best ways to reduce shipping costs for growing businesses.
Invo Fulfilment provides 3PL distribution services for diverse customers, so we can help you find the right solution for your business. There are no hidden charges, and because each business is unique, we’re flexible in our approach to fulfilment. If you’d like to optimise your distribution, please contact us today.
Tip 1: Choose a Connected Location
Miles mean money, so when you’re looking at minimising the distance travelled to get your product to market, then location matters. It can make sense to warehouse your goods near the place of manufacture or the customer or a compromise between the two to lower distribution costs.
The closer you are to transport networks, the more efficiently you can supply your customers, particularly when transporting goods by road. It’s no accident that the UK’s motorways are lined with Amazon warehouses. It can make sense to hold larger stockholdings in a central location and smaller satellite holdings at other strategic points.
Prime distribution locations have one thing in common: they’re connected. However, a well-connected location will also have a higher rental or purchase price. So a balance needs to be made between the cost of distribution and the warehousing real estate.
Tip 2: Use Route Planning Software
Every minute and mile on the road means higher distribution costs. So efficiency at the route planning stage is key to minimising distribution costs when moving freight and cargo. Whether you have a fleet of vehicles or a lone Ford Transit, experienced staff and powerful logistics software can help your business plan effectively.
Sophisticated route optimisation software like MaxOptra examines time windows, vehicle types and load capacity to ensure efficient planning. This software typically reduces daily mileage by 20%, which is why it’s so popular among professional logistics and distribution companies. It’s particularly useful for processing lots of data, such as finding the best route when there are multiple drops at diverse destinations.
Logistics software can also help companies analyse their performance. Data collected over time can help flag issues so that problems can be looked at and addressed. This is where experience makes the difference. Experienced drivers and logistics managers can interpret the data and understand how weather conditions, time of day, type of load and destination can impact deliveries.
The situation on the ground can be very different to what was visualised at the planning stage. Road closures, accidents and breakdowns happen, so drivers and logistics teams need to be agile. Having a “Plan B” in reserve can distinguish between a customer receiving their goods in time or not. This is particularly important if goods are perishable or must be stored under specific conditions.
Effective communication is also essential. Live driver location updates and a connected team mean unforeseen problems can be sorted out quickly. Vehicle tracking software keeps logistics teams and their customers in the loop and means that drivers can be re-routed whenever the situation on the road changes.
Tip 3: Minimise the Risk of Lost and Damaged Stock
Saving on distribution costs isn’t just about minimising your diesel bill. Ensuring the right stock is delivered in the right condition is just as important. You pay twice for damaged stock. Not only do you have to provide replacement stock, but you also need to pay for the re-delivery.
Delivering wrong or damaged stock also damages your reputation, which is why it’s essential that your logistics team has the right checks and procedures in place. Your transported goods cargo is at risk every time it’s moved. Having visibility across your supply chain helps to reduce the possibility of stock loss or damage at every stage of the journey.
Integrating warehouse and logistics software can provide transparency throughout the distribution process, helping to keep all stakeholders informed of the stock location and progress. Accountability also makes deliveries more likely to be made with due care and attention.
Quality checks can help flag issues before goods reach the customer. These procedures can include barcode storage and scanning, visible checks by drivers and warehouse staff and a paper or digital trail of stock. A reputable distribution partner will have these systems in place.
Choosing a reliable 3PL partner protects your products and your reputation.
Tip 4: Store Well to Ship Well
Efficient shipping starts with efficient storage, so it’s best to store your stock in a way that makes sense for distribution. Storing your goods on pallets means they can be transported from the warehouse to the trailer in bulk using forklifts, which is fast and cost-effective.
Pallets have standardised sizes but can be loaded to different heights. Because each pallet has a specific weight capacity, heavier loads will stack lower than lighter ones. This is why pallet volume and weight are key measurements for loading lorries or warehouses.
Shipping well also means making sure goods can’t move around in transit. Items are easily damaged if they aren’t properly fixed to the pallet. One of the most effective ways to do this is with pallet wrap. This stretchable film is wrapped around a pallet to keep the contents secure. It also provides a waterproof barrier to protect the load from environmental damage when used correctly.
International pallet sizes vary, affecting container loads destined for import or export. Standard pallets in the UK measure 1.2m long x 1m wide, while Euro pallets are slightly narrower at 1.2m x 0.8m. A reputable distribution partner can suggest the best options for your business.
Tip 5: Choose a Specialist Distribution Partner
Operating an in-house logistics team takes time and money from your core business, so using a specialist third party logistics company is often more cost-effective. It avoids distribution costs by avoiding the large capital outlay necessary for lorries and logistics staff, and service terms are often very flexible. Contracts may be offered load-by-load or on a regular drop-off and pick-up schedule. This helps reduce distribution costs by limiting vehicle transportation costs to exactly what a business needs.
Distribution costs are lowered with third-party logistics companies as these companies will be optimised for efficient distribution. They will invest in their workforce, vehicles, and the latest technologies to deliver a fast and reliable service. Specialist logistics firms will also be well-insured and legislation compliant. Accreditations such as BRC Global Standards for storage and distribution offer another layer of security of service.
Cut Distribution Costs with Invo Fulfilment
If you are looking for an award-winning distribution partner, Invo Fulfilment can help. We provide our clients with a world-class customer experience and flexible terms. We are part of Involvement and have been distributing goods to industries worldwide for over 60 years. We offer palletised delivery from a single pallet to full lorry loads, so whatever your distribution requirements, Invo Fulfilment can take care of it.
Why not contact us today and find out how we can fulfil your 3PL distribution needs?
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