How to improve logistics cost management
Compared with reducing resource consumption and improving production efficiency, logistics is called the "third source of profit". In many companies, logistics Cost accounts for a large proportion. So everyone knows how to improve logistics cost management? Let’s take a look below!
Understanding of logistics costs
According to national standard logistics terminology, logistics cost (Logistics cost) refers to the monetary expression of materialized labor and living labor consumed in logistics activities. The concept itself is impeccable, and it is often this unqualified concept of "always right" that makes it difficult for companies to operate, because different companies have very different understandings of logistics costs. The different understandings of logistics costs are mainly due to the following reasons:
1. Different companies are engaged in different logistics fields. The size of logistics costs depends on the scope of calculation, and the scope of logistics is quite large. From the perspective of classification of the scope of logistics activities, it includes raw material supply logistics, production logistics, sales logistics (distribution), recycling logistics, waste logistics, etc. The scope of logistics activities is different, and the cost is obviously different.
2. The scope of logistics activities is the same, but the objects for calculating logistics activities are different. Logistics activity refers to the implementation and management process of logistics functions. According to the national standard definition of logistics, logistics activities include transportation, storage, loading and unloading, handling, packaging, circulation processing, distribution, information processing, etc. Which logistics activities are used as cost calculation objects? Is it all activities or some of them? There are quite a few differences between companies.
3. Which types of expenses should be included in the cost? Whether the company pays freight, storage fees, etc. and logistics fees paid to outside the company, or the company's internal expenses such as labor costs, depreciation fees, repair fees, fuel costs, etc., which part of them is included in the logistics cost will directly affect The size of logistics costs.
In summary, the size of logistics costs depends on the above three factors. Determining different prerequisites leads to completely different results, which makes it difficult to compare logistics costs between enterprises, forcing enterprises to understand and implement logistics cost management issues from a strategic perspective.
Strategic characteristics of logistics cost management
Logistics cost control refers to the planning, coordination and control of logistics-related expenses. There is a view in academic circles that logistics is not only a specific operational task in the process of enterprise development, but has more strategic characteristics. Therefore, the characteristics of logistics cost management should be understood from a developmental, systematic, and dialectical perspective.
1. The strategic importance of logistics cost management. Logistics cost management is to use costs to manage logistics and is an important area of ??logistics management. There are three reasons for logistics cost management:
First, costs can faithfully reflect the effects of logistics activities. Specifically, if there is waste, the cost will increase; on the contrary, with reasonable activities, the cost will naturally decrease. This reflection of the actual situation enables enterprises to understand the quality of the management situation in a timely manner. At the same time, through costs, we can also grasp the inconsistency between plans and actual activities.
Second, cost can become the only common yardstick for evaluating all activities. That is to say, the different results obtained through monetary evaluation activities can be reflected as cost differences. All activities can be grasped by the unified scale of cost and can be compared and analyzed on the same occasion, which increases the cost. The importance of management.
Third, logistics cost reduction has a multiplier effect. For example, when sales are 10 million yuan, if logistics costs account for 10% of sales, it is 1 million yuan. This means that as long as the logistics cost is reduced by 10%, the profit will be increased by 100,000 yuan. If the company's sales profit margin is 2%, to create a profit of 100,000 yuan, it needs to increase sales by 5 million yuan. That is, a 10% reduction in logistics costs is equivalent to a 50% increase in sales.
2. The development of logistics cost management. Since the scope of logistics cost calculation is not horizontally comparable, each enterprise grasps logistics costs based on its own knowledge and understanding, so there is no need for enterprises to evaluate logistics performance by comparing with other enterprises. Enterprises should use their own logistics costs in a certain year as the basis for comparison, and conduct vertical comparisons and evaluations, that is, understand logistics cost management from a development perspective. As long as logistics costs are gradually reduced compared with before, such logistics cost management Just be productive. In addition, logistics cost management is by no means simply cutting costs, but focuses on development, the relationship between input and output, and the driving force for the entire enterprise. As long as the increase in logistics costs can bring about a greater increase in revenue, logistics costs will Management is equally successful.
3. Systematic logistics cost management. The systematic nature of logistics cost management is determined by the systematic nature of logistics. The so-called system is a whole composed of two or more elements that are interconnected and restrict each other and realize specific functions.
Logistics is a system composed of flow elements, resource elements and network elements that realizes the physical movement of products1. The systematic nature of logistics cost management is reflected at two levels:
At the first level, the conflict of goals between the internal elements of the logistics system has a relationship of ebb and flow, which is the so-called "antinomy" law. . For example, the use of batch transportation and vehicle shipment reduces transportation costs, but may increase inventory and increase end-of-logistics processing costs. Saving packaging costs will reduce the protective effect of the product, reduce the efficiency of storage, loading and unloading, and transportation, and even damage the goods, causing greater losses.
At the second level, the goals of the logistics system conflict with those of the external system. The logistics system must pursue cost minimization of its own system, while other external systems also have their own specific goals. Conflicts between these goals are objectively common. Taking a manufacturing company as an example, the cost of the logistics system is affected by the production department and the sales department. The sales department or the production department determines more than half of the logistics cost2. For example, it was originally delivered on the third day after the order was placed, but later it was changed to delivery on the second day after the order was placed. Changes in sales activities like this will increase logistics costs accordingly. This is not the responsibility of the logistics department, but many companies attribute the responsibility to the logistics department. Similar issues include over-purchasing in storage fees, over-production in the production department, etc.
Strategies for implementing logistics cost management from a strategic perspective
1. Reduce logistics costs through the collaboration of logistics elements at different levels. The first level is the coordination of logistics functional elements. Conflicts between logistics functional elements always exist, and individual optimality is not equal to overall optimality. Synergize the goals of various functions such as transportation, loading and unloading, packaging, storage, distribution, and circulation information processing. The basis for collaboration is that the goals of each element must meet the goals of the system that are higher than the elements. As a result of collaboration, the transportation cost may not be the minimum, or the inventory cost may not be the minimum, but the combined cost of transportation and storage must be the minimum.
The second level is the collaboration between the logistics department and other departments. For example, if the production department does not overproduce, inventory expenses can be reduced, the products produced are of reliable quality, and the cost of recycling defective products can be reduced. The goals of the sales department and the logistics department are also conflicting. However, if the logistics department's small batches and timely delivery can promote sales, improve service quality, and enhance corporate image, the increase in logistics costs is still worthwhile. In order to achieve better coordination between departments, the organization can be reorganized according to the company's situation and a horizontal logistics management department can be established.
The third level is the collaboration between logistics supply chain elements with property rights as the link. Supply chain refers to the network chain structure formed by upstream and downstream enterprises involved in providing products or services to end users in the production and circulation process. There are two famous sayings in the logistics academic community: "There are only supply chains in the market but no enterprises" and "The real competition is not the competition between enterprises, but the competition between supply chains." From this perspective, it is not enough for the company's own logistics efficiency. It also needs to coordinate the relationship with other companies within the supply chain (such as suppliers, retailers, etc.) and customers to realize the cost of the entire supply chain activities. minimize.
2. The nerve that builds the logistics system: information system. The above discussion shows that local logistics efficiency optimization cannot ensure that enterprises obtain cost advantages in competition. To this end, enterprises must rely on the construction of modern information systems to effectively link various internal logistics functional elements with external strategic partners to form a logistics rapid response system and a business strategy system. Specifically, through the full sharing of user demand information resources, companies can adjust their business plans in a timely manner to avoid ineffective operations, thereby overall controlling the possibility of ineffective logistics costs.
3. Merger strategy. The merger strategy includes two levels, one is the merger of methods, and the other is the simultaneous distribution. The method of merging means that when arranging vehicle transportation, the enterprise makes full use of the volume and load capacity of the vehicle to ensure that the vehicle is fully loaded. For example, large-volume and small-weight cargo can be loaded together with small-volume and heavy-weight cargo, which can not only meet the load requirements, but also make full use of the vehicle's volume. Single distribution is a kind of exclusive enjoyment at the property right level, also known as centralized distribution. It is a distribution method in which several enterprises combine small quantities into large quantities, jointly utilize all logistics facilities, coordinate operations in a larger area, and jointly provide a series of distribution services to one or several customers.
4. Reduce logistics costs through trade-offs and strategic combinations of logistics models. From the perspective of property rights, logistics models can be roughly divided into self-operated logistics, logistics alliances and third-party logistics. In logistics practice, which logistics model or models an enterprise should choose should be comprehensively weighed from a strategic perspective with the ultimate goal of minimizing logistics costs. The basis for weighing and choosing is mainly based on four dimensions: the financial strength of the enterprise, management capabilities, the strategic position of logistics in enterprise development, and the transaction costs of the logistics market. If logistics is very important to the development of the enterprise and the enterprise's management coordination cost is less than the transaction cost of entrusting a third-party logistics, then self-operated logistics should be chosen. For those small and medium-sized enterprises that lack logistics management experience and have weak financial strength, adopting third-party logistics is a wise choice. If the management ability is poor and logistics is very important to the development of the enterprise, a logistics alliance should be considered.
Finally, it should be noted that the reduction of logistics costs cannot be at the expense of the decline in user service quality. Otherwise, it will be a waste of food because of choking, which is not the original intention of logistics cost management.
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