Reduce logistic costs up to 82% by optimization of order volume

November 26, 2024

Companies in EU are facing high logistic costs due to factors like higher fuel prices, labor shortages, and stricter emissions standards. However, optimizing order volumes can lead to significant savings, up to 82%. By analyzing order patterns, leveraging gain-share models between you and your customers, and adjusting operational processes, significant cost savings can be achieved while maintaining or even improving service levels.

Logistic costs in EU increased heavily in recent years

Road transport costs in the EU have spiked significantly. In 2022, diesel prices increased by nearly 50%, largely due to supply chain disruptions and geopolitical tensions, which directly impacts trucking expenses. Additionally, the EU faces a shortfall of about 400,000 truck drivers, driving wages up and intensifying labor costs (see impact per market here: link . New emissions standards, such as the Euro 6 and Euro 7 regulations, are requiring fleets to invest in cleaner but more expensive vehicles, further increasing operational costs. Meanwhile, road tolls have risen across several EU countries, with Germany, for instance, planning toll hikes in 2024, expected to impact freight rates across the region. According to Panteia/NEA, transport cost will increase by another 5% in 2025 in The Netherlands (link)

What can you do? Collaborate with your clients to balance service level and logistic costs and save up to 82%!

The table below graph the potential savings for the Dutch market based on 2024 road transport prices, with data from multiple logistics providers. For example, a 10 LDM (“loading meter” or roughly 10 pallets) shipment is 82% cheaper per LDM than a shipment under 2 LDM.

*Picture 1: percentage logistics cost reduction in case of increased order size*

While it’s clear that logistics costs decrease as order volumes increase, three critical factors are often overlooked:

Order frequency agreements with customers
Gain-share models between customers and suppliers
Decrease of operational workload and increase of efficiency with regards to picking, loading and unloading

*Picture 2: shipment scenarios and cost reduction*

How can 4SC help to reduce logistic costs: some examples

4Supplychain supports customers in analyzing their order patterns and implementing strategies to reduce logistics costs. Beyond order volume and frequency, we consider several key factors, such as:

Logistics cost benchmarking: Ensuring your pricing aligns with current market conditions. If required, we can support in a tender.
Network or Centre of gravity analysis: Identifying the ideal location for your warehouse(s). Read more here
Multiple origin and destination locations: Is a milk run efficient, and what is the optimal route?
3PL contract review: Assessing third-party logistics agreements for optimal terms and performance.