Axlerate Logo

3 ways to reduce transportation cost in logistics

Image of a person counting money to represent transportation cost in logistics

Understanding transportation cost in logistics

Transportation costs in logistics are skyrocketing because of the increasing fuel prices, labour charges and loss resulting from accidents. Logistics owners, fleet managers and truck drivers encounter a greater financial burden while operating their commercial vehicles. According to a survey, 44% of fleets rated increasing costs as a top challenge to daily fleet operations (Source: G2 Tech Marketplace).

What factors affect total logistics cost?

Logistics cost management is a tedious yet a highly necessary aspect of the transportation industry. The logistics industry involves a number of challenges with regard to increasing costs in terms of last mile delivery, empty miles, maintenance, insurance costs and more.

  • Last mile delivery: Last mile delivery is the process of transporting the packaging from the hub to the final destination. It is often the most expensive part of the shipping process. The last-mile delivery executive survey conducted by the Capgemini Research Institute from October–November 2018 reveals that last mile delivery accounts for almost 41% of the total logistics cost. 

  • Empty miles: Empty miles in trucking have a profoundly negative impact on the transportation cost in logistics. Not only does it require fuel and incur maintenance costs, but there is no money generated from these trips since the trucks return to their destination without any shipments.

  • Operational expenses: Maintenance costs are a major financial burden as certain components of trucks need to be repaired or replaced on a regular basis. Also, driving on improper roads leads to higher fuel consumption and might even result in accidents for which insurance premium has to be paid on a regular basis. Moreover, there are additional transportation costs in logistics such as salary for drivers even during idle hours when they remain at warehouses or other destinations. 

Why should you use technology to reduce transportation costs?

Transportation involves complex operations and therefore, manual processing is often time consuming and incurs a heavy cost. However, technological solutions can efficiently streamline transportation in terms of efficiency and cost reduction. 

Technological devices and software including GPS, telematics, digital freight matching platforms and similar technologies prove to be the best solution for reducing logistics cost.  For instance, according to a survey, across a variety of industries, GPS fleet management helps lower accident costs by 16-30%, fuel costs by 7-20% and labor costs 9-25% in 2018 (Source: G2 Tech Marketplace). 

3 ways to reduce transportation cost in logistics

  • Shipment Consolidation: Transportation cost in logistics can be reduced through effective load planning. By identifying trucks heading to similar destinations, it is possible to consolidate two different loads into one truck and consequently save time while also reducing logistics cost. Logistics cost management can be optimized through shipment consolidation with the use of Truckload Optimization Software, Transport Management Systems, and Digital Freight Matching Platforms.

  • Preventive Maintenance: Implementing preventive maintenance can reduce vehicle downtime, improve fuel efficiency and provide drivers with a safer environment while also reducing maintenance and insurance costs. Maintenance issues can be detected with greater precision and reliability using Telematics technology and fleet management software.

  • Data Analytics: Gaining access to actionable, real-time data enables fleets to maximize performance, cut costs and minimize risk. Data can be efficiently sourced from telematics and fleet management software. The data can range from fuel consumption to monitoring driver behavior, allowing you to get a comprehensive view of fleet performance and better logistics cost management by preventing overhead expenses.

Let’s Wrap Up!

Transportation costs in logistics are increasing rapidly and frequently. Therefore, efficient  logistics cost management is of prime importance. It is necessary to reduce logistics costs in terms of last mile delivery, empty miles and operational expenses. The total logistics cost can be reduced by shipment consolidation, preventive maintenance and data analytics. Integrating technological solutions including Truckload Optimization Software, Transport Management Systems, Digital Freight Matching Platforms, telematics and fleet management software can help with reducing logistics costs.

Axlerate provides a unified digital logistics management platform with transportation management solutions to simplify tolls, fuel purchases, fleet expenses, loans, insurance, escrow, payments, truck booking, fleet management and the buying and selling of logistics products and services. 

Simplify your fleet operations and payments with our unified fleet management platform.



Related Posts

Scroll to Top