How to Improve on Saving Fuel Costs

How to Improve on Saving Fuel Costs

A company may incur high costs due to the transport of goods and services from the warehouses to the dealers or consumers. There are various strategies in supply chain management, which are essential to cut down the transport cost. Optimizing the operational efficiency of the transport logistics in the supply chain can help a business to reduce considerable expenses. Fuel costs notably contribute to increased expenses in a supply chain operation (A & A Customs Brokers, 2017). Thus, a business should strive to reduce the consumption of fuel during transportation processes. One of the methods of reducing fuel cost is by outsourcing outbound logistics. Another appropriate way of reducing the cost of fuel includes consolidation of the shipments. Combining shipments helps the firm to reduce fuel consumption and transport costs. The paper discusses the methods of saving fuel costs in transport logistics.

Outsourcing Transport

Small firms can save costs by outsourcing transport. Sometimes, it may be costly for a firm to invest in the transport sector because buying as well as maintaining the trucks and other carriers can consume significant resources. Outsourcing the transport gives a firm a highly variable cost structure, which grants it flexibility in its operation (CSCMP, n.d.). The transport of the goods, such as those requiring excessive care, may require specialized equipment, which may be costly to the manufacturing company. In furtherance, the costs can increase if the transport must be done more frequently.

It would be a nice idea to outsource the transport from a supplier who specializes in the transport field. Furthermore, outsourcing can be necessary because transport services may not be the core competency for a smaller company. Other factors such as government regulations can increase the cost of transport. Notably, compliance checks and document processing combined with the cost of fuel can result in increased transport expenses. Thus, Outsourcing may help a company avoid the costs.

Proper Planning for the Customer Care Services

The customer services may have a notable impact on the money that a company spends on transport. Some companies offer free delivery of products to customers in order to win their loyalty. Nevertheless, transportation costs may increase if a firm decides to offer free delivery services to every consumer. A firm may decide to give a particular customer transport services if he or she purchases goods worth certain value or weight. Alternatively, a company may deliver goods to South on Monday, to North on Tuesday, and to the West on Thursday. The step would help a company to save money by cutting “unnecessary servicing” to the clients. Thus, transport planning is an essential way of reducing the expenses on the fuel. Nevertheless, a company should proceed with caution because the consumers are sensitive to shipping costs being incorporated in their bill.

Appropriate Design of the Supply Chain Network

An organization can keep the costs down by reducing the use of the trucks in the supply chain. The management should design the supply chain in a manner that minimizes product handing, especially through transportation. Every time the products are moved from the warehouse to the suppliers or the customers, the cost of transport usually increases. The design of the supply chain should be in a way that it allows minimal handling, reduces the stock points and facilitates effective use of distribution points. The above measure results on low distribution costs, which in turn cut down the fuel expense.

The design of the supply chain network should consider the inbound and outbound logistics. Proper control of the routing during the inbound and outbound logistics can play a crucial role in the reduction of fuel costs. The company should regulate carrier and the routing for inbound freights. The shipping contracts during the outbound logistics should be given to a third party. The company may decide to control the transport logistics, in part, and leave the other part to the third party.

Supply Chain Visibility and Technology

Management should ensure visibility of the outbound logistics on the supply chain in order to promote effective management. The mismanagement of logistics can lead to additional expenses for a company. Visibility of the supply chain ensures that the top executives have better insight into the routing. The management should be in a position to determine the distance traveled and routes covered. It can establish a tracking software in order to determine the overall freight distances.

Leveraging technology in Transport Management Systems (TMS) helps a business to have control over its operations. The management can access if the vendors have selected a relatively expensive means of transport or an inappropriate routing for a particular shipment (Ascent Global Logistics, 2017). Thus, the TMS helps to ensure the effectiveness and accountability of the vendors. Regulating the vendors helps save a lot of fuel, and consequently, the transport cost.

Consolidated Shipments

It is straight forward that transporting cargo in full truckload (FCL) is cost-saving compared to the less than truckload (LCL). A firm will make many shipments using LCL compared to FCL. Thus, the use of FCL results in reduced shipments and this reduces the cost of fuel. It is essential to define the recommended minimum capacity for vendor goods. The firm may decide to consolidate the shipments in order to reduce fuel consumption when transporting the goods. For instance, a company may combine multiple shipments from several suppliers with the same destination to a single shipment. Thus, the firm will not have to transport the goods to each supplier at a time. Sometime, the company may purchase LCL from a particular supplier. It can be a good idea to collaborate with another company in order to combine the shipments and share the costs of fuel.

Embracing an Integrated Platform

The manager of a small company may save the cost of logistics if he or she decides to integrate the firm’s operations into a single unit. The manager should ensure that other stakeholders including the customers, dealers, and suppliers could access services and goods at that point. Failure to do this, a company may end up duplicating transport activities across different operations. The above step also increases the distance that the carriers have to cover to deliver the services. The duplication of the transport efforts would mean increased fuel expenses for a business.

Conclusion

Transport logistics, especially fuel consumption, contributes to the supply chain costs. Small firms should take various measure in order to cut down the cost of fuel in transport logistics. Outsourcing transport services can help a firm to reduce the cost of transport since it will not spend any funds on the fuel. A firm needs also to consolidate its shipments to reduce the distance traveled, and ultimately, the cost of fuel. Having visibility of the whole supply chain helps the firm to monitor the routing of the vendor and prevent incorrect choices.

References

A & A Customs Brokers. (2017). Strategies for Reducing Logistics and Supply Chain Costs. Retrieved from https://www.aacb.com/reducing-logistics-costs-supply-chain-costs/

Ascent Global Logistics. (2017). 3 Tips to Reduce Inbound Logistics Costs. Retrieved from http://blog.ascentgl.com/3-tips-to-reduce-inbound-logistics-costs

CSCMP. (n.d.). 7 Ways Everyone Can Cut Supply Chain Costs. Retrieved from https://www.supplychainquarterly.com/topics/Strategy/scq201102seven/

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