How Logistics Management Software Reduces Operational Costs?

Introduction

Every eCommerce business deals with its own set of expenses. Yet, logistics is a common factor that often claims the largest share. As per a recent study, global logistics costs are set to increase by $13 trillion by 2026. Factors such as increasing fuel charges, labor shortages, and supply chain disruptions are the primary drivers of these growing logistics costs. 

If not handled properly, these things can shake a company's financial foundation and severely impact profitability. To tackle this issue, most retailers invest in Logistics Management Software (LMS). But do logistics management solutions really help in operational cost reduction? 

Let's check out. But first…. 

What Is Logistics Management Software?

Logistics management software is a tool that handles end-to-end shipping operations for businesses. It uses technologies like AI, ML, and predictive analytics to optimize various aspects of shipping and improve the company’s bottom line

6 Ways Logistics Management Systems Slash Operational Costs

Here are a few ways courier management solutions help in reducing high administrative expenses: 

1. Optimizing Delivery Routes

Fuel costs are one of the major contributors to overall logistics expenses. Recent statistics show that the global fuel energy price index stood at $177.39 index points in 2024, and the number is growing day by day. In such a situation, reducing each unnecessary mile becomes an absolute necessity.

Thanks to modern logistics management software systems, they have come up with a route optimization feature to help businesses find the optimal routes to fulfill orders. The shipping management systems analyze various factors, such as distance, road conditions, and delivery priorities to determine the most efficient methods of route planning.

Plus, it also monitors traffic conditions, so your drivers can avoid congested areas and minimize fuel consumption. In addition, optimizing routes helps with delivery clustering to ensure drivers can manage to deliver multiple orders in one area before moving on to the next. When you offer faster and more reliable deliveries constantly, it also results in improved customer satisfaction. 

Tyltgo, a last-mile delivery company, achieved a 5% improvement in gross profits and has been saving around $3000/month after investing in route optimization solutions. 

2. Improving Inventory Management

Most LMS solutions get seamlessly integrated with inventory management systems to help in operational cost reduction. As per the Meteor Space Study, inventory shortage or overstock costs businesses $1.5 trillion/year.  Thankfully, LMS platforms help in live tracking of inventory and auto-replenishment. With real-time tracking capabilities, you can mitigate the risks of overstocking and stockout, both of which can shake your financial foundation and leave you with added administrative costs.

At the same time, it ensures that inventory is accurate and orders are being shipped to shoppers without any errors. This eliminates the operational costs incurred by returns. In addition, it also ensures improved customer satisfaction through timely and accurate deliveries. 

3. Helping in Carrier Selection

Logistics Management Solutions come pre-integrated with numerous carriers across the globe. You can go live with any carrier with a single click and start your operations. At the same time, these LMS solutions offer pre-negotiated shipping rates across multiple carriers and let you compare rates. Consequently, merchants can choose the most cost-effective carrier option and create a special pricing agreement with the provider. 

Additionally, logistics management software solutions use AI and ML algorithms to pick the best solution based on shipment type, destination, and the company’s personal preferences. This eliminates the risk of delivery failures and saves brands from costly reshipment and reverse logistics. 

4. Automating Manual Tasks

The overall logistics operations involve handling numerous individual yet essential tasks. These mostly include label generation, AWB number creation, order tracking, shipping exception management, etc. Not only are these tasks time-consuming, but they are also repetitive. 

By using a Logistics Management Solution, you can put all these tasks on autopilot and cut down on a large workforce and manual errors. As a result, it lowers the monthly payroll expenses so that you can invest in other important aspects of your business. Take the example of Amazon; it has adopted automation in various aspects of shipping to achieve enhanced operational efficiency and lower operational costs. 

Moreover, automating tasks helps reduce delivery errors like wrong address input, data entry mistakes, and incorrect shipping label generation. These manual errors can lead to failed delivery. Failed deliveries can result in significant expenses because a single failed delivery costs retailers an average of $17.2. 

5. Enabling Shipment Consolidation

Freight consolidation is the process of combining multiple smaller shipments into a larger one. The LMS solution provides businesses with real-time shipment visibility and helps them decide when orders can be grouped together. Doing so saves costs on multiple fronts, including transportation costs. 

First, freight providers usually offer discounts on full-truckload shipments compared to less-than-truckload shipments. As a result, retailers can benefit from discounted rates. Second, when shipments are consolidated, truck space is better utilized which further helps decrease the cost per unit of cargo. Third, by grouping shipments that are geographically close, you can minimize fuel consumption and save on driver wages and labor costs. All of these contribute to significant cost savings down the line. 

6. Offering Data-Driven Insights

Logistics Management Systems offer data-backed insights into various aspects of the delivery journey, which helps businesses cut off operational costs to a great extent. It provides data on inventory levels, warehouse operations, transit times, failed deliveries, returns and helps them spot potential bottlenecks down the line. 

For example, a Logistics Management System identifies a special type of recurring returns pattern and provides up to date information on it. With this data, retailers can pinpoint what exactly is falling through the cracks and address the issue with a better strategy. Over time, businesses can achieve better delivery rates and a competitive edge and eliminate costs caused by returns. 

Here’s How ClickPost Fuels Profit With Cost Savings?

ClickPost is an AI & ML-based logistics intelligence platform that offers integrations with 500+ carriers, eCommerce platforms, WMS, OMS, and ERP (Enterprise Resource Planning) solutions. It offers a host of APIs that you can add to your existing systems to perform tasks like carrier allocation, checkout optimization, shipment tracking, delivering customer notifications, managing failed deliveries, returns management, and more. Brands like Puma, Adidas, and Lenskart use ClickPost’s solutions to improve their logistics and supply chain operations. 

Today's competitive edge is all about streamlining operations and boosting supply chain performance through overall efficiency. ClickPost not only helps in improving customers’ post-purchase experience and businesses’ logistics efficiency but also reduces their operational costs.

Conclusion

Logistics optimization is undoubtedly one of the most expensive parts of the entire supply chain management process. Most of the time, brands unintentionally pay extra on shipping and struggle to keep up with their profit margin. However, the key to a successful eCommerce business lies in how businesses optimize their shipping operations and save on operational costs. And in this process, a logistics management solution proves to be a must-have asset in your tech stack. In fact, these platforms also help achieve improved customer satisfaction while enhancing profitability.