Controlling Costs at the Fulfillment Level
Controlling costs is a primary objective of any business looking to scale. As the logistics industry continues to battle a chaotic global economy, finding creative methods of controlling costs with their operations is becoming increasingly more important than ever before. The trick, however, is finding areas of waste or misuse of expenditures that threaten to compromise your ability to fulfill to customers at levels they expect.
One of the biggest areas of waste in the modern supply chain occurs at the fulfillment level. In fact, there are multiple segments or fulfillment operations that are filled with inefficient processes, outdated equipment, or have the wrong people involved in key areas.
Luckily, there are several simple ways of controlling costs at the fulfillment level. In this blog post, we are going to explore a few of those best practices for discovering the key areas of waste in the fulfillment stage to help you start minimizing your overall cost to serve.
Want our help? Contact our team today and let us perform an audit of your fulfillment process and reveal to you all the areas where you could be saving money.
Complete a Full-Service Fulfillment Audit
While there are several trouble spots that are common sources of accelerated spending in fulfillment operations, each business is unique. Every successful executive and manager understands this reality, which is why the first step is to complete a robust fulfillment segment audit.
The key item to remember here is to review each area of your operation that has to do with delivering your commodity to your end-customer. This includes inbound receipt of inventory, raw materials, movement of these products, storage and warehousing costs, labor (direct and indirect), materials, and various other supplies.
After reviewing your fulfillment processes and documenting areas of waste, it’s equally important to outline what levels of cost-cutting are acceptable. It might be tempting to take a shortcut by following industry standards for spending in each area of your business, but again – this is a methodology that does not yield positive results.
Setting benchmarks that are specific to your business will help you gather the insights needed to set goals, expectations, make all the hard decisions, and ultimately reduce costs and spending.
Specific Areas to Consider
As your audit and benchmarks have been completed, the next phase of reducing fulfillment costs is activation. A business manager or owner is forced to make difficult decisions – especially in order to maintain profitability and keep their doors open.
However, there are a few important areas that should be considered as focal points to can be scaled as volume increases during peak seasons.
The biggest consumer of wasted resources – financially speaking, is having excessive labor expenses. The main reason why fulfillment centers or segments struggle is due to keeping employees busy when volume is low. While it’s very difficult to dictate sales daily, accurate forecasting – especially those targeted to peak areas of operation can help with this task.
One way to maintain an accurate workforce that is cost-effective is by keeping a staffing ratio of full to part-time employees. Other areas you might consider include working with staffing agencies, or other setting up seasonal hiring procedures. The important item to remember is there is no black and white solution to this problem. It must be customized for each business type, volume, and more.
Outside of payroll considerations, the next level of fulfillment related expenses come through with the activation of transportation management processes. Inbound and outbound freight costs can impact more than 10 percent of your bottom-line profits. Having solid relationships with carriers, freight brokers or your 3PL can significantly reduce these expenses and in many instances, improve service at the same time.
However, transportation management is a time-consuming and daunting task that will consume additional resources – potentially adding to your cost-saving hurdles.
The Role of the Professional 3PL
In the past, the third-party logistics company was simply a resource that helped logistics businesses book freight movement and other supply chain duties. Today’s 3PL is much more advanced and full-service.
A professional third-party logistics company like Redwood Logistics offers complete supply chain solutions – including discovering creative methods of reducing costs at the fulfillment level. They can handle seasonal product fulfillment, with in-house centers that remove payroll, staffing, and transportation management costs from the equation.
If you’re serious about finding better resources for keeping your fulfillment operations running at peak financial efficiency, without compromising service, contact Redwood Logistics today.