Consistently reducing and optimizing costs without increasing logistics risk can only be achieved by intelligently combining industry-specific analytics frameworks, the right technology tools and logistics processes engineered for effectiveness as well as greater efficiency.
1. Process Design and Development
“Smarter” processes are the key to more cost-effective operations. This means that organizations serious about creating more streamlined and more effective networks need to look at their operations in detail before beginning any redesign of logistics processes. This involves deep analysis to:
- Develop a granular view of the process activities (carrier identification, logistics spend analysis, etc.);
- Define key performance indicators such as asset utilization and median loading time and then link them to the business outcome of particular costs;
- Identify the drivers of outstanding cost performance; for instance, building multiple “what if” scenarios for networks to estimate impact on costs;
- Benchmark against industry standards for cost management in order to understand current performance gaps;
- Implement best practices to improve costs and sustain process performance.
Businesses that take the time to do a detailed and thorough analysis of operations from end-to-end and across the global footprint can yield deep insights that will support a new, more effective—and less costly—logistics network. By analyzing current processes, organizations can identify process steps where cost leakages occur. Some process steps may add little or no value; others may need enabling technology tools in order to maximize efficiency and increase cost effectiveness.
Here are a few real-world examples from deep analysis:
- After a pharmaceutical major conducted a thorough analysis of logistics processes for an acquired company and standardized processes, it was able to identify cost optimization opportunities of 25 percent.
- A chemicals leader achieved five to seven percent cost savings through revisiting processes related to shipping frequency, reassignment of supplier-warehouse combinations and set up of ‘milk-runs.’
- A life sciences major identified 13 percent potential baseline freight cost savings by analyzing logistics management processes and finding opportunities to increase consolidation of shipments.
