6 Different Ways You Can Optimize Your Logistics Costs

6 Different Ways You Can Optimize Your Logistics Costs

Anybody serious about making money by selling products understands the importance of minimizing logistics costs. Depending on the type of product you wish to sell, the exact processes for how you can do so effectively can differ. At the end of the day, though, there are various techniques that you can keep in mind.

Although an IBC Tanks’ Role in Logistics might be something you are already considering, there are also many other considerations. As a business executive, minimizing logistics costs means more money in your pocket at the end of the day. Below, we will be breaking down 6 of the best ways to minimize logistics costs.

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What Are Logistics Costs?

If you are in the business of selling a product of some sort, then all of the expenses that come before the sale of the product are logistics costs. This can include sourcing the materials used for making the product, the cost of labor, the shipping costs, etc. If you practice good logistics costs planning, you can quickly optimize the total profit you get coming in and minimize unnecessary costs.

1. Cut Processing Corners

The first thing that you need to do while trying to optimize logistics costs is to go through each step of your production and shipping processes. Analyze each step carefully to find some corners that can potentially be cut out without harming your product’s overall finished quality. Simply taking a day off to consider each part of your production process can end up saving you a lot of money.

Imagine that your laborers have to spend an extra 30 minutes for each product to haul it across town and have it packaged. If you want to cut some corners, try having the packing done in the same production facility. Move some things around, if necessary, to make the space that you need to do so. An extra 30 minutes for each product will add up over time and eventually save a lot of money in labor and transportation costs.

2. Look Into New Technology

One of the biggest mistakes that a business owner will make is to stick with all the same guns they have been using for decades. The saying that you can’t teach an old dog new tricks is exactly what we are referring to here. It is important to keep that hunger mindset for success when you started the business over into your years of success.

To do so, keep up to date with all of the latest trends in your niche. Failure to do so can be the biggest mistake that you can make as an executive. This is because it is inevitable that new technology will come around that makes your competitors’ potential cease on it and outperform you on the market immediately.

3. Key Performance Indicators

Key performance indicators (KPIs) are one of the ways that you can get real data on each aspect of your logistics costs. This can include a whole range of steps, including your shipping time, warehousing costs, order accuracy, production rate, inventory accuracy, and so on. The KPIs you use for your business will typically include at least all of these things if you are packaging and shipping a physical product.

If you are new to KPIs, then start slowly. Perhaps you can start simply by monitoring the time it takes for a product to be produced and then arrive at the customer’s door. This sort of start-to-finish KPI can be something that you use to optimize your overall production time and then eventually usher in the use of other KPIs in various aspects of your production processes.

4. Optimize Your Storage Systems

If you have a business that needs to store bulk sizes of materials used for production, products getting ready for shipping, inventory, and so on, then you should be on the lookout for ways to optimize your storage systems. Having IBC tanks, for example, can help you optimize your storage systems and make it so that you can organize all of the materials in your production facility in a neat manner.

The consequence of not having an organized system of storage is that production time typically will increase. Think of it this way: an experienced employee will constantly be learning where to go next to complete their job quickly. If they are constantly going to the same place for a particular material, they will learn its proper place. As a result, they will also become quicker at handling production. This is just one of many reasons that storage systems are an important factor to consider.

5. Consider Transportation Costs

Transportation is one of the unavoidable costs that you will have as a business shipping physical products. If you plan out your transportation costs carefully, though, you can end up easily saving lots of money at the end of the day. Transportation costs should be one of the first things you optimize.

To do this, consider your delivery routes and fuel costs. If there is a route that will save you two extra miles for each shipping, then try it out. Those who have extra capital to invest can also consider buying new vehicles that are more efficient on gas to save lots of money on fuel. Cutting back transportation costs can have a huge impact on your level of profit.

6. Consider Employee Competence

Having all the right tools and steps in place for production can only go so far. At the end of the day, you will need a team of employees who can efficiently handle the production tasks. They will be the ones who determine how effective your optimization techniques for production costs will be. Therefore, consider having better checks in place for your employees. 

Imagine that you have an employee named Amy and an employee named Tyler that do the same job. Tyler consistently spends 30 minutes longer for each task and also takes more breaks than Amy does. As much as your administration may be attached to the good jokes that Tyler says on the job, the logistics costs should always come first. Consider replacing Tyler with an employee who will turn around with efforts that match what you find in Amy.

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Some Other Ideas to Consider

In all reality, the above ideas are only a small chunk of what you can potentially do. The main idea here is that you should analyze your own individual circumstances. At the end of the day, you will be the one who has the best ideas that are most relevant for your own business. If you have extra capital on hand to invest, you will also be given the ability to optimize logistics costs quickly.

For example, opening up new facilities, hiring new employees, buying new equipment, and so on are all great ways that you can continue optimizing your logistics costs. As a business owner, you already know how important investing in your company is. Therefore, don’t be afraid to invest a little more than you already have to continue optimizing your logistics costs.

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