The term logistics costs involve all expenses related to getting a product from manufacturing to the end client, including packaging, transport, and storage costs. Taking proactive actions such as optimizing protective packaging can reduce logistics costs significantly. We analyze how. 

Why logistic costs are important for your business

In today’s complex logistics landscape, companies face a number of challenges that can quickly and unexpectedly escalate logistics costs. However, it’s possible to name the 3 main factors that have an influence on logistic costs: 

• Storage and inventory: products that are stored not only are not sold but are responsible for different expenses, from storage space rental to labor costs, taxes, and maintenance. An incorrect inventory can also generate product shortages, which means the company is losing sales opportunities. 
• Packaging: the wrong packaging solutions can cause damage to goods and generate costly returns from end clients. Inadequate packaging configurations can also take too much space or weigh too much and generate extra spending on transport and storage. 
• Transportation costs: rented or owned vehicles, fuel, or maintenance are the usual costs associated with transport. 

With these main logistics costs in mind, companies that are able to reduce logistics costs in any of these areas (even those that manage to make marginal improvements) will have access to an important competitive advantage.

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Reduce logistic costs: the challenges

Inventory and warehouse management

Discoordination between production and demand is a common issue that prevents companies from reducing logistic costs. Storing too many products is costly, not only because of the aforementioned reasons but also because some products can be damaged if time goes by and they’re not sold. At the same time, a shortage of inventory makes companies lose sales opportunities. 

In order to eliminate these costs, companies may study taking several actions: 

Use digital forecasting models to anticipate demand. Through Big Data analysis (which goes beyond historical data) digital tools can help companies predict their inventory needs. Through these tools, companies may look at relevant information such as best-selling items and sales trends. 

For instance, companies can reduce logistics costs associated with warehousing (staff, machinery, rental space) if they can predict periods where demand for their products is lower. 

Optimize their protective packaging to minimize storage space and ensure products are protected as long as possible, even in storage conditions. 

Shifting transportation

Today’s complex global economy requires products to travel across the world, often using different modes of transportation. In terms of challenges for logistics, this means that packaging units will need to be optimized to shift between different types of transportation while, at the same time, guaranteeing the safety of goods.  

These shifting transportation issues might be aggravated if inventory and warehouse are not well managed, as explained above: if a product is not available when a customer orders it, companies might need to opt for inefficient transportation options that shift continuously (from road transportation to air or sea transportation). 

This quickly escalates logistics costs and, without the adequate packaging system, can also pose a serious risk for the product’s integrity and safety, which would increase costs even more.

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Total pack system: reduce logistic costs with Knauf Appliances

The right packaging design, that considers protective foam packaging, protective packaging materials, and other solutions, helps companies to reduce logistic costs and plays a crucial role in avoiding damage, return costs, and distribution control.

The analysis and design of the right packaging encourage cost reduction through the following actions: 

• Packaging costs are lowered, as the most efficient protective packaging materials are chosen. 
• Transport and warehouse space are optimized through the study of packaging systems that fill transportation options and leave no empty space, but also minimize their size. 
• Transportation mode shifting can be sped up through the use of adequate packaging systems, especially tertiary solutions. Packaging systems can be designed to be easy to move manually or using a forklift. They can also be customized for the specific routes and transportation modes that the company’s products will have to go through. 
• Adequate packaging solutions guarantee product safety, making sure the packaging+product system will endure handling and transportation risks without damage. This, in turn, helps companies reduce return costs that arise when customers refuse to take a product that has been damaged during the distribution cycle. 
• Sustainability analysis of packaging solutions also allows companies to reduce logistics costs, as using energy-efficient solutions optimizes energy consumption and even costs related to transportation fuel. 

In order to help companies have access to the advantages of optimizing their packaging, at Knauf Appliances we have developed our Total Pack System. This is a circular collaborative analysis system that allows us to understand each project’s needs and find the right packaging system. 

Through 4 stages (analysis, diagnosis, test and launch) and using our ID-lab’s expertise, we’re able to provide customized solutions for our clients, making sure they meet their cost-reduction goals while, at the same time, generating optimized, cost-efficient packaging systems.

Get in touch with us and learn more about how to reduce logistics costs through protective packaging.