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What Should 3rd Party Logistics Companies Do to Reduce Costs by 30%?

Compared with self-operated and self-built logistics, 3rd party logistics companies can reduce customer logistics costs in many aspects because of their larger scale and more sophisticated operations, and the total cost can even be reduced by 30%.

This puts a huge test on the service side. Only by fulfilling the needs of omni-channel and multi-platform retail logistics services for customers and realizing an integrated logistics solution for the entire supply chain can the market competitiveness of customers be improved.

  1. Low transportation cost of 3rd party logistics companies

The shorter the average transportation distance, the lower the transportation cost.

A large-scale 3rd party logistics companies realizes a nationwide warehouse distribution coverage layout, and maintains a certain coverage density in each area, so that the average transportation route becomes shorter and the cost is lower.

For small chain companies, in the same area, due to the small number of stores and low density, the average transportation route of a single store is relatively long and the cost will be relatively high. If small and medium-sized enterprises rely on the transportation network, they will increase the density of common stores and achieve a win-win situation, thereby effectively and greatly reducing the average transportation cost of a single store.

  1. Low inventory levels of 3rd party logistics companies

Inventory is a measure to deal with the risk of out of stock.

On the one hand, because 3rd party logistics companies provide storage, sorting, and transportation services for multiple chain companies, they can coordinate multiple chain companies to share the risk of shortages, which is equivalent to real-time sharing and allocation of inventory of multiple chain companies. This helps to reduce the total inventory level.

On the other hand, when multiple chain enterprises purchase from the same supplier, as the scale of purchase expands and the integration of storage location reduces the delivery cost of the supplier, the stronger the negotiation ability with the supplier. This is conducive to shortening the delivery cycle of suppliers, further reducing inventory levels, and reducing the average inventory level of each chain enterprise.

  1. Low inventory capital occupancy rate of 3rd party logistics companies

The benefits of inventory are easily overlooked.

Corresponding to the low inventory level, the occupancy rate of inventory funds will also be relatively low, reducing the interest level of inventory funds, and allowing companies to use more funds for other investment channels, reducing the opportunity cost of funds being occupied. The latter is a kind of hidden cost, which is easy to be ignored by the enterprise, thus resulting in waste.

The combination of low inventory fund occupancy rate, low interest level of inventory funds, and low opportunity cost of inventory funds can greatly reduce inventory costs and increase the financial freedom of enterprises.

  1. Low sorting cost of 3rd party logistics companies

It is important to control sorting costs.

Controlling the cost of sorting is more important for companies with a high rate of dismantling and improving economic efficiency. Through process optimization and information system function enhancement, the consumption of logistics resources by sorting operations is reduced, and the efficiency of sorters is improved, which is mainly obtained by reducing their ineffective labor.

Large-scale 3rd party logistics companies have professionals who continuously analyze business processes, and professional information technology companies cooperate to implement various process optimization programs, so that sorting costs are getting lower and lower.

  1. Low sorting error rate of 3rd party logistics companies

Sorting errors are one of the most critical points affecting efficiency.

With the support of advanced equipment and information technology, large-scale 3rd party logistics companies can track which goods are received into which position, which position is replenished from, which position is sorted out, which turnover box entered, and which transport vehicle, which store was finally delivered to, etc. In many important links, the system automatically prompts sorting information, rechecks sorting errors, and corrects sorting errors in real time.

  1. Low logistics investment in fixed equipment

The system and equipment capabilities determine the lower limit of efficiency.

The establishment of modern logistics management capabilities is increasingly inseparable from the support of various advanced technologies, such as logistics information systems containing advanced management ideas, automated warehouse operation procedures, and scientifically planned national distribution networks. All these require a large amount of fixed investment, including Information system investment, automation equipment investment, warehouse investment and equipment investment, etc.

Not only that, because of the rapid technological development, only continuous updates can maintain the leading logistics management capabilities. Additional investment and real-time updates are undoubtedly a huge cost for a small and medium-sized enterprise. However, large and professional 3rd party logistics companies have the ability to continuously invest and update to maintain the advanced nature of logistics management. Therefore, it can also enable small and medium-sized enterprises to always enjoy first-class logistics management services on the basis of lower-cost dedicated fixed asset investment.

  1. Low inventory loss rate of 3rd party logistics companies

Loss prevention reduces inventory costs.

Inventory loss will increase inventory costs, such as overdue loss, breakage, theft, accidental loss, etc. The implementation of product expiry date management, combined with location management, batch management, etc., improves actual execution and helps reduce inventory loss. When the goods are in the warehouse, the validity period of the goods is strictly controlled, and the RF equipment is used for real-time registration for tracking and management throughout the process. In the replenishment operation, the information system automatically calculates the replenishment products and the location, and strictly implements the first-in-first-out method, that is, the first-in-first-out product is replenished first to avoid the loss caused by the expiration in the warehouse.

At the operation site, implement 5S management to keep all operations smooth, tidy, and hygienic to prevent contamination and damage the quality of goods. Valuable goods are divided into separate areas for key management, and dynamic inventory is carried out at any time during replenishment and picking, and the picking process is recorded in detail to strictly control the theft of valuables.

  1. Low transaction costs bring benefits from large-scale

From the perspective of the supply chain, logistics costs should also include transaction costs between chain enterprises and suppliers, such as negotiation costs, transportation costs, and product prices.

3rd party logistics companies can gather the purchasing needs of most chain companies, integrate these needs, and then conduct joint purchases from suppliers to obtain economies of scale, including economies of scale in negotiation costs, economies of scale in transportation costs, and lower purchase prices , The short purchase cycle mentioned above, among which the most critical item is the lower purchase price of the goods, or the preferential total rebate.

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