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LOGISTICS COSTS GUIDE: Plan easier with logistics simulation

By UniCarriers

Logistics Costs

The types of cost attached to a goods flow or to internal goods handling may vary from company to company and may also be expressed in many ways. The various types of cost are expressed and collected as a single logistics cost, consisting of: Buildings; Storage equipment; Materials handling equipment (MHE); Personnel; Administration; Capital cost (stock value) and External transport.

These types of cost cover the items which are attributable to and directly affect the internal goods flow. It is easy to get trapped into only focusing on the cost-of-acquisition of MHE, commonly known as the price.  Doing this means that the real total cost of operation (TCO) impact is not considered. Such analysis can be difficult without the right tools. The acquisition cost (price) of equipment can represent less than 10% of the TCO.  The breakdown of logistics costs gives a practical basis for obtaining input data for simulation and analyses.

Analysing your operation – cost reduction

The logistics price is the measure which reveals the productivity of the warehouse.  By building, testing, and making adjustments to the warehouse in the computer, optimum solutions can be obtained. Different storage systems can be compared.  Types of truck can be tested. Rates of turnover and utilisation of capacity can be varied.  In brief, the real situation with regard to the work of the warehouse and the goods flow can be analysed. The UniCarriers Logistics Analyser is a tool which gives invaluable information on which to base decisions concerning changes and new investments.

If you are planning a new warehouse, or thinking about making changes to an existing one, it’s possible to use some basic figures about the operation to make an analysis of how effective the solution will be.  Using the Logistics Analyser, our sales team are able to work with you to design and simulate an optimal warehouse layout, taking into account your building size, workflows and business demands, before any investment is made.

Download your free PDF guide ‘The benefits of logistics simulation’ here.  It’s completely free and will tell you a lot more about the deep insights warehouse simulation software can provide, and how to take your next steps if you’re interested in using it.

www.unicarrierseurope.com

Environmental supply chain risks to cost companies $120 billion by 2026

Companies face up to $120 billion in costs from environmental risks in their supply chains by 2026, according to new research released today by CDP.

The report, Transparency to Transformation: A Chain Reaction, analyses data from 8,000+ supplier companies disclosing to their corporate customers via CDP in 2020 and finds a combined $120 billion of increased costs among those companies alone within the next five years from environmental risks.

The sectors that report the most potential cost increase are manufacturing (US$64 billion), food, beverage & agriculture (US$17 billion), and power generation (US$11 billion).  

Due to most supply chains running on very tight profit margins, increased costs are expected to be passed up the chain in a domino effect to their buyers. In turn, these companies are likely to pass the cost onto consumers. 

Sonya Bhonsle, Global Head of Value Chains at CDP, said: “With US$120 billion at stake, addressing environmental risks through supply chain engagement is vital for companies to be competitive and resilient in the changing market. Leading companies that address these risks will benefit from lower costs and better reputations. This gives them a more competitive edge today and helps them become more resilient for the economy of tomorrow. Meanwhile, laggard companies risk being left behind. As the climate and ecological crisis worsens and the economy shifts, it’s essential for both business and society that we have a Green Recovery from COVID-19 and build back better. Smart business procurement is key to that transition.”

The environmental risks causing cost increases stem from climate change, deforestation and water-related impacts. These cover physical impacts, for example increased severity and frequency of cyclones and floods, increased cost of raw materials; and regulatory and market changes as the world addresses environmental crises, such as carbon pricing and increased spending on product innovation due to changing customer demands.

Corporate buyers could be impacted by this looming cost increase. To address this risk, increasingly buyers are demanding transparency and action from their suppliers to tackle environmental impacts in their supply chains. These include 150+ major buyers with over US$4.3 trillion in purchasing spend, such as Google, L’Oréal, Walmart, Braskem and Toyota. As CDP supply chain members, they request thousands of their key suppliers to disclose their environmental data through CDP each year and use this data in their procurement decisions and supplier engagement.

Other key findings from the report include:

  • Supply chain GHG emissions are 11.4 times as high as operational emissions on average. This is over twice as high as previous estimates, due to more comprehensive emissions data. 
  • The ratio varies drastically by sector: E.g., in retail, supply chain emissions are 28 times as high as operational emissions.
  • The number of supplier companies disclosing data has increased from almost 7,000 to over 8,000 in 2020, despite the disruption from COVID-19 (a 16% increase) 
  • Suppliers undertook activities that cut emissions by 619 million metric tons of C02e in the last year and saved US$33.7 billionin the process. This is equivalent to emissions from 159 coal power plants running for a year [1]
  • However, climate action is not yet cascading through the supply chain as needed: only 37% of suppliers are engaging their own suppliers to cut emissions. 

The demand from big corporate buyers for their suppliers to be transparent on environmental impacts and take action to address them is growing, despite the pressures from COVID-19. In 2020, the number of buyers requesting disclosure through CDP’s system grew by 24% and they collectively requested data from 15,600+ suppliers, a 19% increase on the last year. In part this increase in market demand has been driven by the large companies increasingly setting science-based targets, which usually require them to cut their supply chain (Scope 3) emissions. Achieving their targets depends on engaging their suppliers.

Redistributing surplus food to charities ‘saves the UK economy £51m every year’

A new impact report released by FareShare claims that collecting food that would otherwise go to waste and redistributing it to good causes saves the UK economy approximately £51 million every year.

The Wasted Opportunity Report, carried out by NEF consulting, evaluates the economic and social value of redistributed surplus food, as well as the current and potential cost avoided by the UK public sector as a result of the charity’s work.

By collecting food that would otherwise go to waste and redistributing it to charity and community groups, FareShare says it creates approximately £50.9 million of social-economic impact each year. This is made up of £6.9 million in social value to the beneficiaries themselves and £44 million in saving to the State (in savings to the NHS, the criminal justice system, to schools and in social care).

The implication of this calculation is that, were FareShare and other charities in the food redistribution sector able to scale up their operational capacity in order to handle 50% of the surplus food available in the UK supply chain, the value back to the State could be as much as £500 million per year.

FareShare redistributes good quality surplus food from the UK supply chain and delivers it to nearly 10,000 charities and community groups, including homeless hostels, children’s breakfast clubs, domestic violence refuges and community cafes.

In FareShare’s Annual Report the charity announced that in 2017-2018 it redistributed 17,000 tonnes of in date, good to eat surplus food — enough to create almost 37 million meals.

It says this surplus food is worth £30 million per year in cash savings to the charitable sector, and means charities can spend more delivering their frontline services.

The report follows the announcement by Michael Gove, SoS for Environment, Food and Rural Affairs for a £15million pilot project that aims to make it as cost effective for the food industry to redistribute their surplus to charities as it is for them to dispose of it as waste.

FareShare Chief Executive, Lindsay Boswell, said:  “We have always known food is a catalyst for good and now we are able to evidence it. A balanced, nutritious diet provides obvious health benefits, but sharing a meal also helps alleviate loneliness and reduces the number of times an isolated person may, for example, book a GPs appointment just so they have someone to talk to. The cost avoided by the State by charities serving up nutritious meals with FareShare food is a staggering £51 million every year, and that’s with us accessing just five per cent of the surplus food available. Imagine what we could do if we could get more of it.

“We want to be clear – the food we redistribute is in date and good quality, just like the food you’d eat at home. That’s why we’re also launching our Good Food Does Good campaign, to show off our incredible fresh food and to celebrate the amazing businesses who are already giving us their surplus.”

Download the full technical report here.