Logistics costs set to skyrocket

The fuel price is said to continue to break new ground as the year comes to a close, with estimates of R20 per litre in 2022 having a strong possibility of becoming a concerning reality. The ongoing record-high fuel prices place companies under immense pressure to find cheaper ways of doing business – particularly those that make a lot of deliveries or customer visits.

“The key to securing savings of anywhere from 10-25% on logistics costs – savings that will endure long after the fuel price drops – is to focus on greater efficiencies in terms of distribution,” says Grant Marshbank, CEO of VSC Solutions.

According to Marshbank, most of the technology solutions that can bring about these efficiencies can be implemented quickly, and will result in a favourable return on investment from the very first month.

Applying smarter strategy by using a periodic exercise called Network Modellling allows a business to determine the most efficient way of executing its operations. Network Modelling include determining the best possible geographic location of warehouses, comparing supply chain costs, determining the impact on transport costs when using the business’ own vehicles for inter-warehouse transfers, comparing the CO2 footprint of the supply chain, and so on. “This exercise is vital for determining whether the business’ current operation is optimised, and if going after certain new business will be profitable,” explains Marshbank.

Optimise routes

“Ensuring that the least number of vehicles drive the least amount of kilometres is the goal of route optimisation,” says Marshbank.

Route optimisation works by feeding data on what needs to be delivered, to where and by when, into a system that generates a set of routes to ensure that the load is spread evenly across available delivery days. According to Marshbank, these optimisation tools are available for both SMEs and larger companies. “There’s no excuse anymore for having vehicles stationary one day and maxed out on others!”

Ensure proper execution
Next, a business needs to ensure that these optimised routes are being used. “By comparing data from each vehicle’s tracking device to the routes generated by the optimisation tool, a business can see on a map and Gantt chart where a vehicle is versus where it should be,” explains Marshbank.

Automate processes
While automating route optimization processes won’t directly decrease fuel costs, it will remove inefficiencies that result in other cost and time savings. “Manual delivery processes waste time,” says Marshbank. “By integrating data from an ordering system with a driver’s smartphone, acceptance of goods can be automated, and an electronic proof of delivery sent immediately, enabling invoicing to take place that much faster.”
“By automating these basic business processes – of which invoicing is just one example – businesses can get more from their resources like their people and their trucks.”

Integrate systems and measure performance
By integrating its various systems, a business can transfer data seamlessly, enabling more effective reporting that gives complete visibility of the entire supply chain in real time. “By combining salary and overtime data, data from distribution systems, and data such as revenue, costs, and margins, a business can calculate the profitability of routes, or the root cause of overtime, all in real time,” says Marshbank. “The possibilities for enabling better informed decisions are endless!”

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