Third-party logistics service providers, compared to self-operated or self-built logistics, can reduce customer logistics costs in multiple aspects due to larger scale and greater specialization, potentially achieving total cost reductions of up to 30%. This poses a significant challenge for service providers, who must meet customers' omni-channel, multi-platform retail logistics needs and provide integrated supply chain logistics solutions to enhance customers' market competitiveness. 1. Lower Transportation Costs The shorter the average transportation distance, the lower the transportation cost. Large-scale third-party logistics companies achieve nationwide warehouse and distribution coverage, maintaining a certain density in each region, which shortens average transportation routes and reduces costs. For small chain enterprises, within the same region, due to fewer stores and lower density, the average transportation route per store is longer, leading to higher costs. If small and medium-sized enterprises leverage the transportation network, they can increase shared store density, achieving a win-win situation and effectively reducing the average transportation cost per store. 2. Lower Inventory Levels Inventory is a measure to mitigate stockout risks. On one hand, since third-party logistics companies provide storage, sorting, and delivery services for multiple chain enterprises, they can coordinate these enterprises to share stockout risks, effectively achieving real-time inventory sharing and allocation among them, which helps reduce overall inventory levels. On the other hand, when multiple chain enterprises purchase from the same supplier, the expansion of procurement scale and integration of storage locations reduce supplier delivery costs, strengthen negotiation power with suppliers, shorten supplier delivery cycles, further reduce inventory levels, and decrease the average inventory level for each chain enterprise. 3. Lower Inventory Capital Occupancy Rate The benefits of inventory are often overlooked. Corresponding to lower inventory levels, the inventory capital occupancy rate will also be relatively low, reducing inventory capital interest costs and allowing enterprises to allocate more funds to other investment avenues, reducing the opportunity cost of capital being tied up. The latter is a hidden cost that is easily overlooked by enterprises, leading to waste. The combination of low inventory capital occupancy rate, low inventory capital interest costs, and low inventory capital opportunity costs can significantly reduce inventory costs and increase financial flexibility for enterprises. 4. Lower Sorting Costs Controlling sorting costs is important. Controlling sorting costs is particularly important for enterprises with high split-case ratios to improve economic efficiency. Through process optimization and enhanced information system functions, the consumption of logistics resources in sorting operations is reduced, and sorting efficiency is improved, mainly by reducing non-value-added labor. Large third-party logistics companies have professional staff continuously analyzing business processes and collaborate with specialized IT companies to implement various process optimization solutions, making sorting costs increasingly lower. 5. Lower Sorting Error Rates Sorting errors are one of the most critical factors affecting efficiency. Large third-party logistics enterprises, supported by advanced equipment and information technology, can track which storage location a product enters upon receipt, from which location it is replenished, from which location it is picked, into which tote it goes, onto which transport vehicle it is loaded, and to which store it is finally delivered. At multiple critical stages, the system automatically prompts sorting information, reviews sorting errors, and corrects them in real time. 6. Lower Fixed Equipment Investment in Logistics System and equipment capabilities determine the lower bound of efficiency. Building modern logistics management capabilities increasingly relies on various advanced technologies, such as logistics information systems with advanced management concepts, automated warehouse operation processes, and scientifically planned nationwide distribution networks. These require substantial fixed investments, including information system investments, automation equipment investments, warehouse facility investments, and equipment investments. Moreover, due to rapid technological development, continuous updates are necessary to maintain leading logistics management capabilities. Additional investments and real-time updates are undoubtedly significant costs for small and medium-sized enterprises. However, large, professional third-party logistics companies have the capacity to continuously invest and update, maintaining advanced logistics management. Therefore, small and medium-sized enterprises can always enjoy first-class logistics management services based on lower fixed asset investments. 7. Lower Inventory Shrinkage Rate Loss prevention reduces inventory costs. Inventory shrinkage increases inventory costs, such as expiration losses, damage, theft, and accidental losses. Implementing product expiration date management, combined with location management and batch management, and enhancing execution, helps reduce inventory shrinkage rates. Upon product receipt, expiration dates are strictly controlled, and RF devices are used for real-time registration to enable full tracking and management. During replenishment, the information system automatically calculates which products and locations to replenish, strictly enforcing first-in, first-out (FIFO) methods, ensuring that products entering first are replenished first, avoiding losses due to in-warehouse expiration. At the operational site, 5S management is implemented to maintain smooth, clean, and hygienic operations, preventing contamination and damage to product quality. Valuable products are allocated separate areas for key management, and during replenishment and picking, dynamic inventory counts are conducted at any time, with detailed records of the picking process, strictly controlling theft of valuable items. 8. Lower Transaction Costs Scale brings benefits. From a supply chain perspective, logistics costs should also include transaction costs between chain enterprises and suppliers, such as negotiation costs, transportation costs, and product prices. Third-party logistics companies can aggregate the procurement needs of multiple chain enterprises, integrate these needs, and conduct joint procurement with suppliers, thereby achieving economies of scale, including economies of scale in negotiation costs, transportation costs, lower product purchase prices, and shorter procurement cycles as mentioned earlier. The most critical factor is lower product purchase prices or favorable rebate totals. The 3rd (CFIC) China FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme "New Forces, New Ecology," inviting 1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to jointly explore a new chapter of cross-industry integration! Core Topics of This Conference:
How can the FMCG industry leverage B2B to achieve new growth opportunities?
How should the new supply chain behind new retail be built?
How can intra-city logistics help B2B achieve leapfrog development?
Highlights of This Conference:
The industry's first "2017 China FMCG B2B Industry Competitiveness White Paper"
Case sharing of excellent transforming and upgrading distributors
Conference + exhibition upgrade: Hall 6 Internet Technology Exhibition strengthens connections
Alibaba Retail Link, PGL Financial, Eternal Asia Supply Chain, Best Store Plus, Yi Jiu Pi, and Haiding: leaders from various fields deliver on-site speeches presenting pioneering viewpoints.
November 8-9, 2017 Xinyue Hall, Chongqing Yuelai International Convention Center Registration is now open. Long press the QR code below or click "Read Original" to register. Add friend with note "Conference Registration" Click the link below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: 2016 "FMCG + Internet" Summit Forum -END-