What a Decentralized Logistics Operation Really Costs

Inefficiencies. Compliance issues at the local level. Siloed, outdated protocols. As supply chains grow to include diverse regional facilities, spread-out networks and over-reliance on local freight providers can often lead to increased operational costs.

Whether it’s regional managers approving premium rates with little oversight or an increase in payment and invoicing errors, there are a thousand small cuts that can crop up across any large-scale operation, slowly bleeding money from the bottom line. But it’s often the less visible impacts of decentralization that are the most costly.

Here are some of the hidden costs that decentralized locations invite—creating supply chain inefficiencies, preventing companies from gaining crucial strategic insights, and hindering them from competing on a global level.

Wasteful manual processes

Local facilities have a tendency to get set in their ways. The company might be exploring new technologies to improve its processes, but if these tools aren’t consistently rolled out and implemented across the organization as a whole, regional staff may continue to practice outdated and inefficient communication and procedural standards. This opens the door for errors and delays that can be felt across the entire supply chain.

Take paper invoices, which often contain mistakes like missing compliance information. Such errors and omissions might seem simple enough to fix. But in reality, they can cause carrier payment delays, audit backlogs, and invoicing issues that ripple throughout the company.

And paper invoices are far from the only defunct process frequently found at regional facilities. Every unnecessarily manual task—from hand-written shipping documentation to the multiple phone calls it can take to schedule a single pickup—builds another layer of waste into an already complex supply chain.

The phrase “work smarter, not harder” can apply to every facility, but only if companies take steps to ensure new systems and processes are successfully deployed across the organization. This may involve on-the-ground training at local facilities to make sure staff are up to speed and comfortable with the new way of doing things. Otherwise, they may simply revert back to old habits when no one is looking.

Lack of standardization

Without standardized processes across the organization, there’s no way of knowing whether disparate staff always use optimal practices, carriers, and services. Even modern systems can become bogged down with inaccurate invoicing and auditing, expensive premium shipping costs, and non-optimal carriers when there is a lack of strong controls and corporate governance.

Standardizing procedures doesn’t just increase oversight. It also provides opportunities for systemic improvements at every facility. Once uniform procedures are in place, needless waste—like premium shipping rates or unallocated freight costs—are easier to account for, or avoid altogether.

Siloed costs and decreased visibility

Even “successful” decentralized operations come at a huge long-term cost—lack of data sharing. When facilities operate in a silo, supply chain managers and decision-makers miss out on valuable shipping and freight data that provide big-picture insights.

Visibility across the entire supply chain lets companies tweak local shipments, correct problem areas in real time, and forecast market trends to lower costs and negotiate the best possible freight rates from multiple providers. Siloed operations lock this crucial data away from strategic decision-makers. This increases freight spending today while adding blind spots that prevent companies from securing best-in-class rates in the future.

But the cost of this lack of strategic data goes even deeper.

Loss of an economy of scale

Decentralized operations may seem like an opportunity to leverage local expertise. But in today’s global market, operating a disjointed network of regional facilities just won’t cut it. Decentralization keeps even large companies from leveraging one of their strongest competitive advantages—an economy of scale.

Without accurate baseline data from the entire supply chain, companies can’t consolidate freight buying rates to negotiate more competitive prices across every location. This lack of data also means that successful automation of inefficient, repetitive tasks (like freight negotiation and invoice auditing) is simply out of reach.

A streamlined, interconnected system leads to better shipping rates, lower operational costs, and increased efficiency across the entire supply chain. And with the right global system—one that includes built-in local support—companies don’t need to lose the flexibility that can help regional facilities to thrive. They just ensure that those facilities don’t become a law unto themselves.

A cohesive, connected supply chain that’s ready for anything

CTSI-Global’s industry-leading web-based platform helps companies regain contol—and gain a huge competitive advantage. The result is a more responsive, resilient, competitive supply chain that’s designed to drive even more profitable growth.

Don’t let a spread-out network cripple a growing supply chain. Contact us today.

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