Corporate cards

Logistics cost management with corporate cards

Apr 05, 2024

Logistics costs have been rising over the years and it has been negatively affecting the bottom line of businesses. Logistics cost management needs to be taken seriously by an organization if they want to optimize their operations and get the most out of their resources. 

Reducing logistics costs can be tricky as you don’t want to compromise on the quality of your operations. Many different aspects of logistics such as resource acquisition, packaging, transportation, inventory, and labor must be looked at in order to find ways to make processes more efficient. 

What is logistics cost?

Any expense that is incurred by an organization to carry out its logistical operations is part of the logistics cost. The way a company handles its logistics cost management will determine whether this function negatively or positively affects the business’s profitability. 

Types of logistics costs businesses should track

1. Inventory management cost

Inventory management refers to the handling of goods whether it is raw materials, work-in-progress, or finished goods.

Each type of inventory needs to be managed and moved across the production and supply chain efficiently in order to keep costs to the lowest degree possible.

2. Warehousing cost

Warehousing cost refers to the expense of storing any inventory and the costs associated with it. This may be an expensive affair depending on whether you own a warehousing facility or plan to use a third-party service provider.

Warehousing also includes the cost of labor that is managing the facility and/or shipping charges to and from the warehouse to transport and store goods.

3. Transportation cost

One major part of logistics cost management is the aspect of transportation.

When you need to move finished goods from the factory to a warehouse or a retail chain, you will need the help of a transportation service to supply all the goods to the correct destination.

4. Labor cost

Whether you have your own logistics team or decide to outsource this function to a service provider, there will be people involved who carry out the tasks of handling goods and transporting them. This is where you will incur labor costs.

5. Cost of investment in new technology

With time, newer technology is developed that can be used to make processes within the supply chain more efficient. But it may cost more in the beginning as a form of investment into these new technologies.

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What is logistics cost optimization?

If you’re wondering how to optimize logistics costs for your business, then you are not alone. While there are many ways to do so, you must find the right way for your business.

The two main ways include reducing dependencies to cut costs and improving the processes & systems you use to get more out of less.

With some trial and error, you will be able to tell how the logistics cost management decisions you make impact the performance of your operations. 

Key strategies for effective logistics cost optimization

1. Maintain supply chain visibility

Not knowing what is happening and where it’s happening is a major problem. Unless and until you have real-time tracking and visibility over your processes, you won’t be able to identify pain points and implement an efficient process.

2. Transportation cost optimization

There are many considerations to be made in the transportation department for logistics. The route you choose to transport goods affects the timely delivery of goods. You should be able to consolidate shipments and avoid multiple trips for shipping your goods.

And finally, you must also choose the most cost-effective transportation mode available to you without compromising other aspects such as safety and timely delivery.

3. Inventory management

Managing inventory is a tricky part of logistics cost management as it requires a certain level of forecasting.

With accurate forecasting, you will be able to know when and where to store goods and not have them go to waste by getting piled up in a warehouse.

4. Supplier management

The supplier that you choose for managing all your logistics is also a major factor in cost optimization.

Supplier selection, negotiations, collaboration, and performance monitoring are important to track so that you know that you’re getting the best possible supplier relationship for your business.

5. Adopt new technologies

Reducing logistics costs can also come from adopting and implementing new technologies such as Transportation Management Systems (TMS), Warehouse Management Systems (WMS), Enterprise Resource Planning (ERP) Systems, Internet of Things (IoT) applications, and more.

6. Introduce expense management solutions into the system

Many times the delay that occurs due to slow payment approvals can cause issues in logistics.

Using corporate cards for employees and a unified system to track all payments in real-time will help streamline payment processes, reduces administrative burden, help enhance security, and make invoice management easier. 

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The role of corporate cards in logistics cost management

Corporate cards have become an increasingly popular payment method in the logistics industry due to their ability to streamline the payment process.

1. Help streamline payment process

Whether it is payments to be made to a supplier, warehouse provider, acquiring of raw materials, shipping charges, etc. giving a corporate card to every employee that is responsible for moving the process into the next step will ensure that payments are made in a timely fashion and without any hiccups. 

Also, discover in detail how corporate virtual cards simplify transactions, enhance security, and optimize expense management. Dive into our article on guide to virtual credit card and revolutionize your payment workflow.

2. Enhanced security

Using corporate cards for payments is an extremely secure method of payment. If you use cash or cheques, there is a chance of losing the money or cheque in real life by either of the parties involved in the transaction.

Physical cards are great for employees to make in-person expenses on the site and virtual corporate cards can help make direct online payments to vendors and suppliers. 

Unlock the potential of virtual cards across diverse industries and use cases. Check out our page on virtual card use cases to see a complete list of virtual card use cases for enterprises as well as startups.

3. Increased control and visibility

Every expense that you make via a corporate card is instantly recorded on an expense management platform that it is linked to. This ensures that no cost goes unnoticed and you have real-time visibility over how the logistics budget is being used.

If you notice anything unusual or fishy, you can stop and rectify it immediately rather than having to detect the problem much later when the damage was already done.

4. Improved supplier relationship

Faster payments not only move the needle for you but it also helps a supplier trust you for your timely payments and provide better services. This in turn helps you grow a strong and healthy relationship with your suppliers.

5. Easy vendor payment

Most digital versions of an invoice nowadays have the ability to pay via a card when you receive them in your email.

So whether it is a local vendor or an international vendor, you can use your virtual or physical corporate card to make payments to them easily wherever they are. 

Read our article on vendor payment process, to know the detailed step by step process behind vendor payments and how automation can help streamline the process.

6. Cost savings

Traditionally, it took a lot of time and effort for the people in charge of the logistics operations to send and get approvals for payments on operational requirements from the finance team.

But when using a corporate card, since the finance team and admins have issued corporate cards for you, you can instantly make payments and reduce the cost of manual processes.

7. Reduced administrative burden

When using a corporate card and expense management system, the administrator's burden shifts from coordinating and getting approval for payments to tracking and controlling how the budget is being used from a central system. This is much more efficient and helps the company manage its logistics-related expenses more effectively. 

Volopay cards for effective logistics expense management

Volopay is one of the leading corporate card and automated expense management platform providers. You can use our physical and virtual corporate cards to manage all your logistical expenses with ease through our centralized system to help finance teams and individuals stay on top of their business expenses.

Here are some key features of our corporate cards:

• Custom spending limits for each card(both physical and virtual)

• Make domestic and international payments to vendors and suppliers.

• Issue one physical card per employee and unlimited virtual cards

• Track all payments in real-time on a single dashboard.

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