Logistics optimization is a key driver of profitability, performance, and competitiveness in retail.
The question that arises for all players in the industry is this: how can logistics costs be optimized while maintaining quality service and a positive customer experience?
The answer is not straightforward. The supply chain, stretching from the supplier to the store, involves many interdependent actors and processes. Any action on one part of the chain can have repercussions elsewhere, so precision and data-driven decision-making are essential.
In this context, forecasting, and especially projections, become essential.
They help retailers anticipate future needs and activity to reduce costs without compromising the efficiency of the supply chain.
In this article, let’s discover together how to make forecasting a powerful lever for optimizing your logistics costs.
Anticipating needs
From Forecasting to Projection: Improving Logistic Planning
In retail, logistics optimization primarily involves finding the right trade-offs between several challenges which, at first glance, seem complicated to reconcile:
- Control of logistical costs
- Customer satisfaction
- Efficient operations management
To find a balance, it’s essential to think one step ahead. If you can foresee upcoming events, you can plan operations across various levels for months ahead. This is why demand forecasting has become a critical element in supply chain management.
With a solution like Optimix XFR, you can establish reliable demand forecasts by combining corrected historical sales data with various influencing factors. However, forecasting alone is not enough to effectively anticipate your operations. It is necessary to go further and transform the forecast into projections of activity.This is the whole interest of a supply chain optimization solution, which relies on advanced algorithms to model predictive scenarios based on forecasts.
With this approach, you gain visibility over multiple logistic scenarios. You can simulate different situations by adjusting input variables to evaluate potential gains and make informed decisions.
Thanks to these projections, you can plan more effectively, adjusting resources, storage capacities, and selecting the best logistics flows.
Forecasting for better management : Anticipating logistic costs
To optimize logistic costs, the best strategy is anticipation. In retail, anticipating needs goes far beyond just the quantity of products needed.
Indeed, forecasting helps you adjust orders and define the necessary quantities for each store. Projections take this even further. Anticipation also applies to stores, warehouses, and transportation.
1. Anticipating logistical costs & needs at the store level
At the store level, forecasts and projections help in better planning activities. This anticipation extends to all operational aspects of the store.
First, you can estimate your human resource needs in advance.Thanks to forecasts, you know when peak activity will occur. You can use this information to plan the schedule for cashiers as sales forecasts dictate the workload at the checkout.
In parallel, projections also serve as a compass for allocating the necessary resources for receiving orders.You know in advance how many trucks will arrive, how many unloading docks will be needed. You can anticipate labor needs for receiving and then stocking.
By adopting this approach based on projections, you can better adjust your workforce, identify potential congestion points, and optimize team allocation. This way, you optimize your HR costs.
Another advantage of projection is that it strengthens your ability to smooth out activity. For example, if you find it challenging to manage the volume of deliveries expected on Friday, you can redistribute these to other days of the week. This helps you streamline your operations, even during peak activity periods.
2. Anticipating storage and transportation needs
Projections also allow for better planning of storage and transportation needs.
With access to accurate data, you can determine in advance the amount of storage space you need. This proactive planning helps optimize storage by limiting costs associated with excess inventory and minimizing the risk of stockouts. You can forecast warehouse capacity utilization and manage storage costs more effectively.
Forecasting also simplifies planning warehouse operations. You can anticipate staffing needs and adjust them based on the predicted volume of incoming and outgoing goods.
Similarly, forecasting streamlines the planning of transportation needs. Knowing your requirements in advance, you can communicate them to your partners.
LOGISTIC FORECAST SHARING
Optimizing logistic costs involves all stakeholders in the supply chain, not just the retailer. Sharing forecasts improves communication with partners, such as carriers, as well as with manufacturers.
Retailers and manufacturers both benefit from collaborating based on activity forecasts.
OPTIMIZING MANUFACTURER'S PRODUCTION CYCLES
A shared forecast offers greater transparency to manufacturers. This enables them to better organize their production cycles.
In the absence of detailed forecasts, manufacturers often adopt a cautious approach. They plan for significant production volumes and then adjust the settings of their production lines for different products or packaging. They must then store goods to fulfill upcoming orders. This lack of visibility results in unnecessary storage costs.
Conversely, when distributors communicate their needs, the manufacturer can anticipate their production setups. They may choose to produce smaller quantities, even if this incurs a cost to reconfigure their production line. The shared forecast allows them to better manage their economic balance.
STOCK FORECASTING: TOWARDS OPTIMIZATION OF CAPACITIES AND COSTS
Access to customer forecasts helps manufacturers better manage their stock levels.
Rather than producing in large quantities and storing, advanced knowledge of needs allows for synchronization of production with actual demand. This approach offers better management of production capacities and a reduction in storage-related costs.
Since the manufacturer knows the order forecasts and firm needs of its customers, there is no longer a need to excessively store raw materials or finished products. It can produce more on a just-in-time basis and better organize its capacity.
Adapting minimum order quantities for cost-effective logistics
Suppliers set minimum order quantities to offset their costs of production, labor, storage, and more. This minimum is a guarantee for the manufacturer to cover costs and generate a basic profit margin.
As a distributor, providing your supplier with detailed forecasts can lead them to reconsider their minimum order quantities.
Based on the information you provide, they can better manage their cycle, refine their production minimums, and produce more accurately. This alignment with your needs makes the minimum order less of a barrier.
Selecting the best quantity pricing scale
In their general terms of sale, suppliers include logistic cost scales based on the ordered and supplied quantities to account for economies of scale associated with full logistic unit orders (pallets, trucks, containers).
You can leverage forecasts to reduce logistic costs by choosing the most cost-effective quantity pricing scale.
This approach is beneficial as it helps find a balance between transportation costs and storage costs. Some products are bulky and therefore expensive to store, while others may incur higher transportation costs.
Optimizing logistics flows: Forecasting to reduce costs
With the transformation of forecasts into detailed projections, retailers and their supply chain ecosystem gain relevant insights to rethink and optimize logistics flows.
Using demand forecasts, distributors create activity projections that can be shared with other links in the chain. This makes supply chain optimization collaborative and more fluid. Companies can thus strategically direct their flows to maximize operational efficiency and cut costs.
IDENTIFYING THE BEST LOGISTICAL ROUTES
Projections enable testing different logistics flow options and calculating their cost impacts.
For each product or group of products, it’s possible to determine the best logistics route to minimize transportation costs and/or limit energy waste.
Identifying the most efficient routes helps minimize traveled distances, optimize loadings, and reduce the overall carbon footprint of the supply chain. Forecasting thus becomes a tool for balancing operational efficiency with environmental responsibility.
IMPROVING THE ALLOCATION OF GOODS
Using forecasts allows for more precise merchandise allocation. Retailers can more effectively allocate products right from the start, minimizing returns and overstock.
This approach helps reduce storage levels and decreases the transit of goods between different sites.
Towards Predictive and Optimized Logistics
Cost optimization in logistics is a major challenge for retailers. It is facilitated by adopting supply chain optimization solutions that not only deliver reliable forecasts but also project various scenarios.
With these tools, logistics managers can now anticipate needs at the store level, in storage spaces, or in transport and adjust operations accordingly. Sharing forecasts with other links in the chain smooths communication, limits unnecessary expenses, and also helps better control financial and energy costs. Finally, projections facilitate the identification of the best logistics flows.
Stakeholders embracing a predictive and collaborative management of the supply chain can already achieve significant performance and profitability gains.
Want to cut your logistics costs and step into the future of logistics—more efficient, sustainable, and resilient?
Discover our Optimix XFR solution:
