Businesses nowadays are always struggling to improve their strategies and make more profits. One important step is to reflect on current opportunities and study the different ways to calculate and reduce costs. This is usually carried out by trying to examine the adapted supply chain and study the profitability plan. This is directly related to landed costs and the way they are being estimated and managed. The optimal situation for all businesses is to find the balance between managing costs and productivity. In this context, several ways landed costs have been proven efficient to increase productivity within a business.

What are landed costs and why are they important?

Landed costs are referred to as the total costs related to a product shipment and transportation including insurance, costs of goods, and freight. The costs of each step depend on many variables such as types of products and business, types of transportation, distances, taxes, brokerage fees, and even exchange rates. 

Calculating landed costs is crucial as it is a way to evaluate your shipping plan and look for extra costs in the supply chain. It is one of the first steps into improving the supply chain efficiency, improving the quality of chosen strategies, and thus reaching more business goals. 

They also represent an insight into an accurate financial budget which is what most strategic and investment decisions are based on, like the type of products to sell, the sales strategies, or even the length of the supply chain itself. 

Even Though they can be complicated to calculate, they have been proven to be a non-negotiable step in business shipment management. 

The Correlation between Landed Costs and Productivity:

If we consider an increase in productivity as an increase in profitability and reaching the business goals, then we can say that it is impacted directly by the landed costs management. So decreasing the landed costs is a strategic move that businessmen definitely should consider regularly. Being considered as the total costs of the whole shipping process, there are different ways to track those extra costs and reduce them.

 Five management decisions can be adapted in order to increase productivity by managing the landed costs. So, what are they?

1- Calculate and Identify your Costs:

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A close -if not exact- estimation of the landed costs is an important step for the managers to make. Even though there is no exact scientific method, there are multiple options of calculation that can be adapted depending on the scale of the supply chain and industry. The most important thing is to try to include all the different parties and costs of the shipping process, taking into consideration all the details. 

Appropriate management and tracking tool are also advised for better calculations and data visualizations. It will help eventually get a clearer image of the costs and facilitate the evaluation process. 

Small businesses can also outsource the calculation process to expert firms if needed.

2- Manage Inventory and Streamline Product Lines

Managing inventory has always been a strategic management step. It is all about improving a company’s value and profitability by detecting and eliminating all sources of material, work, and time waste. So a product line evaluation should be made regularly and action steps must be taken upon it. Unsuccessful and unprofitable products should be considered to drop if needed and best sellers should always be improved and cherished. These evaluations should take into consideration also different factors like demand, market variations, and selling costs. 

Managing inventory is also linked to the type of technology and management tools used. It is always advised to keep track of the latest best practices. Adapting a suitable and efficient management system can make a huge difference in your operations. 

Different inventory management approaches are seeing light but managers must seek the one suitable for their businesses.

3- Manage your Supply Chain Partnerships

It’s no surprise that the shipping market is always changing and growing. As there is a constant increase in demand, new businesses and service providers are seeing light every day and thus different options and deals are being presented continuously. 

Even if your supply chain plan is working, one should always keep strong communication with different partners to see if there is room for improvement.  One will need to look over their present contracts with partners and talk about how they can adjust the prices or shipping options so that you both profit. As the economy is always changing and crises are rising especially after the pandemic, there must always be room for negotiation and changes in partnerships. It is definitely a way to identify where efficiency and productivity can be improved while risk and costs are reduced.

Moreover, new trends and services providers should always be tracked and studied to take them into consideration while evaluating one’s partner’s plan.

4- Revise the Logistical Plan

One can never be too sure about the logistic plan as changes are always happening. You can’t always be sure that your plan is the most efficient one.  There must always be room for evaluation and seeking potential improvement. The logistic plan includes the length of the supply chain, the different providers, the types of shipping routes, or even transportation methods. The changing market is constantly affecting the prices and regulations are changing rapidly across all borders. 

Revising even the internal logistic plan is also crucial for a better optimization of resources.

5- Reassess the Management Plan

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When it comes to cost savings, businesses often ignore one extremely critical part of their daily operations: manual operation and management activities. 

Traditional administrative work can cause all different sorts of extra expenses especially when it comes to low-value tasks. It can also impact the productivity of employees and their work efficiency.

On the other hand, automated processes have been proven to have the power to decrease spending, increase efficiency and boost revenues. 

Thus, the management style should be regularly improved, taking into account new practices and digital technologies. Several companies have been taken as a case study for their management style plan and how it has impacted the efficiency of their operation by reducing landed costs.

To Recap:

If your business includes shipping operations, you should always be ready for the different disruptions within the market. Especially with the pandemic still persisting, new challenges and changes are taking place every day affecting the prices and the normal process. It is crucial to always be on your toes to reduce your landed costs and improve your profitability.