GLA Blog

Cutting Costs on Logistics This Winter

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By Duane Lakey: GLA Financial Manager


Go to any braai or dinner party, and the state of South Africa’s economy will probably come up, especially if you’re around fellow business owners who are trying to create wealth and employment opportunities on their own steam. Optimistically, marginal growth is expected in the near future, with the South African economy showing signs of being “on the right track… with our turning point being near,” according to Jeff Radebe, Planning Minister and government spokesman.


As business owners, when income and expenses are at war in your ledger, the natural instinct is to cut costs. However, this becomes problematic when it is done as a knee-jerk reaction, and not as part of a planned forecasting process.


Factors such as rising electricity bills, governmental red tape and the labour laws are out of the scope of control of the average business owner. However, there are challenges that can, and absolutely must, be overcome in order to run businesses more profitably in this delayed economic season.


Cutting Costs This Winter is as Easy as 1-2-3.


1. Cost and Containment Culture


From the CEO to the cleaner, companies that adopt a consistent cost awareness and containment or restraint attitude are more able to sustain the dry seasons. This approach is favourable in business regardless of whether your business is thriving or struggling. A team approach to empowerment is key; allowing staff to know what the cost implications are for every action taken goes a long way.


2. Become a ‘Tomorrow Thinker’


Quite often, a business’s fixed cost is relatively high compared to total cost. Therefore, when the business is doing poorly, it is difficult to cut costs, which might have devastating implications, such as job losses. When taking on any cost (fixed or variable), think it through – do you really need this cost; or can the current resources within the organisation assist in achieving what you need. Consistent negotiations with suppliers will also assist in making sure your cost base is kept in check. You cannot always afford to pass that cost increase on to a client. Likewise, when your business is thriving, don’t incur unnecessary costs and ‘let the good times roll’ – rather, become a ‘’tomorrow thinker’’.


3. Check Yourself Before You Wreck Yourself


Before any purchase or sale between a supplier or buyer, discuss the intended volumes and forecast of purchases with your Freight Forwarder, as they could provide you with cost saving options.


– When negotiating any purchase or sale of goods, check with your Freight Forwarder what the most suitable Incoterms to purchase on will be. This could save you costs.
– Discuss Forward Exchange Contracts with your Freight Forwarder to cover future freight or overseas commitments and, in this way, preparing yourself for any exchange rate fluctuations. Your Freight Forwarder could possibly assist in setting this up for you.
– Commitment to one Freight Forwarder and building long term relationships counts. Try and make use of one service provider who can provide you with a door to door service, in this way saving on costs.
– Trying to do freight forwarding yourself might seem the right thing to do as far as budget goes, but in the long run you might end up wasting money, and worse –time. Freight Forwarders are in the business because they have the necessary knowhow, and expertise to provide you with an excellent service, and at the same time, save you cost on freight matters. So, leave the Freight Forwarding to the professionals and focus on growing your business.


You cannot predict or foresee all eventualities, but you can be prepared as far as possible for them.


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