Dangerous Savings: 6 Cost Cutting Supply Chain Strategies That Will Cost You in the Long Term

Those working in shipping and last-mile delivery are all too familiar with the ubiquitous dilemma: cost optimization. No stone can be left unturned when considering how best to streamline each operational facet of your organization, and the last mile is no exception. Yet, the difficulty lies not in curtailing costs but in understanding and mitigating the long-term repercussions of such actions.

 With the global last-mile market projected to hit the $200 billion mark by 2027, according to Statista, the financial impact of managing last-mile delivery is undeniably significant. Plenty of cost-cutting strategies are being employed by Supply Chain Management leaders, but the potential long-term implications often remain unseen. 

Speaking of implications, let’s delve into the top cost cutting strategies that businesses implement but could negatively impact supply chain performance:

1. Manual carrier management:

When captive fleets reach their limit, shippers often resort to legacy systems to select and manage carriers rather than leveraging intelligent solutions. Although these outdated management tools may seem cost-effective initially, they could lead to substantial long-term costs. Manual methods like SMS, phone calls, and excel spreadsheets create data silos and hinder transparency. This impairs the ability to track third-party carrier performance, ultimately jeopardizing service level agreements.

However, by implementing a robust, automated third-party delivery system, shippers can significantly enhance their operations. Locus’ intelligent carrier management solution, ShipFlex, allows shippers access to an expansive carrier network. Its automation capabilities, powered by a smart rules engine, considers various parameters such as weight, distance, location, SLA, cost, and more that are specific to individual shippers. This dramatically reduces the margin of manual error, improving overall efficiency.

2. Overlooking tracking and customer experience:

Research reveals that 80% of online shoppers hold elevated expectations regarding the tracking of their orders. As such, it is incumbent upon shippers to equip their dispatch management platforms with an intelligent tracking solution. Many operators, however, overlook tracking, deeming it a cost center, and continue to use rudimentary methods like emails and SMS for customer updates. This approach falls short of providing the real-time tracking that today’s customers demand. In contrast, advanced solutions like those offered by Locus give customers access to real-time tracking with turn-by-turn navigation, offering a link on the checkout page for easy order tracking and automated notifications throughout the order fulfillment process.

3. Custom building a last-mile solution:

The importance of a robust system to manage last-mile operations cannot be overstated. Enterprises with substantial last-mile operations and ample IT resources may be considering the creation of a custom solution. With global spending on digital infrastructure expected to reach $2.8 trillion by 2025, there is a mounting pressure on budgetary and IT teams to deliver. However, in-house solutions consume around 40% of engineering resources and time in maintenance alone. This is before considering the cost of constructing a custom application, which often entails multiple hidden expenses. Opting for a SaaS solution offers more predictability in terms of cost. It eliminates the need to employ resources for system maintenance, as dedicated support teams are at your service. Moreover, the pricing is transparent from the outset of the project.

SaaS vs In house expenses

Building a custom solution will also require internal compliance frameworks that will match global data security, privacy, and regulatory standards, causing a long-term drain of monetary and technical resources. When it comes to a SaaS solution, Locus is already compliant with various regulations, has the latest APIs and features, therefore reducing tech and accelerating time to market, leading to faster and higher ROI.

SaaS vs In-house – ROI

4. Relying on manual routing solutions

Routing is a critical aspect for all last-mile players, be they shippers or carriers. Yet, due to cost considerations, many are hesitant to transition from their legacy routing solutions. Companies frequently lean on solutions that can handle only static routes, shying away from dynamic routing due to the associated costs. This approach places a cap on productivity given the sheer volume of orders and the demand for quick turnarounds that legacy solutions can’t support. Locus’ SaaS-based customer experience and dispatch management platform, with a built-in routing solution, addresses over 180 real-world constraints, making it a dynamic solution capable of quickly and efficiently creating cost-effective routes for drivers. And with the ability to route orders in under 30 seconds, it is an optimal solution for managing on-demand routing.

5. Manual package sorting:

Entities in the Courier, Express, and Parcel (CEP) and Third-Party Logistics (3PL) industries are tasked with sorting packages based on size, location, type of goods, and vehicle match. Traditionally, this process involves a significant number of employees and is time-consuming and prone to errors, leading to delivery delays. While implementing an automated sorting solution may seem costly at first, consider this: Locus’ intelligent Dispatch Management Platform (DMP) with built-in package sorting reduced sorting time by 60% and the sorting personnel requirement by 70% for a client in the CEP market, leading to substantial cost savings.

6. Achieving 99.5% uptime:

According to a survey, 62% of supply chain companies have been hit by cyberattacks. This statistic serves as a reminder of the imperative to invest in secure supply chain systems. A robust and secure dispatch management system, like Locus, equipped with Single Sign-On (SSO) and Role-Based Access Control (RBAC), ISO security certification, and a global uptime of 99.5%, can shield your operations from unexpected disruptions. Coupled with a global support team, our solution provides a safe and efficient environment. Additionally, Locus offers flexible and transparent pricing packages tailored to enterprise needs.

Cost-saving strategies and foresight must go hand-in-hand for effective decision-making in an organization. With advanced analytics, Locus provides invaluable insights into last-mile operations, including fuel consumption, CO2 emissions, costs, and more, empowering your future delivery improvements.

If you’re considering cost-cutting measures to boost your supply chain’s profitability, a consultation with our experts can ensure you’re heading in the right direction.

References:

https://www.statista.com/statistics/1286612/last-mile-delivery-market-size-worldwide/#:~:text=By%202027%2C%20the%20global%20last,increased%20number%20in%20online%20orders
https://www.analyticsinsight.net/global-digital-transformation-market-is-predicted-to-reach-us2-8-trillion-by-2025/#:~:text=By%202025%2C%20global%20digital%20transformation,largest%20during%20the%20forecast%20period
https://flashbox.co/blog/business/6-stats-highlighting-importance-of-last-mile-delivery-in-e-commerce/
https://securityintelligence.com/articles/62-of-surveyed-organizations-hit-by-supply-chain-attacks-in-2021/