REDUCING LOGISTICS COSTS WITHOUT SACRIFICING SERVICE: WHERE THE REAL LEVERS ARE

In an environment of persistent inflation, fuel pressure, and increasingly demanding customers, reducing logistics costs has become a strategic priority. However, the most common mistake is to look for savings exclusively in transportation rates, when a significant share of total cost is generated inside the operation itself: idle time, rework, immobilized inventory, and reactive decisions that seem minor until they are multiplied across thousands of orders.

To put this into perspective, one widely used industry benchmark is helpful. In the United States, total logistics costs were estimated at 2.3 trillion dollars, equivalent to 8.7% of GDP. Within that total, transportation remains the largest component, accounting for 63.1% of aggregate logistics costs in 2024. The takeaway is not to replicate the number, but to understand the message: if most costs come from movement and handling, the real levers are not found only in renegotiating rates, but in redesigning how goods move, how orders are prepared, and how decisions are made.

In Mexico, the operational scale of the sector also reflects its structural weight. According to economic records from DENUE 2025, the transportation and warehousing industry includes 39,208 economic units. In an ecosystem of this size, costs tend to rise not only because of prices, but due to saturation, variability, and growing complexity.

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The Invisible Cost of Inefficiency

Delays, rework, picking errors, and last-minute urgencies do not always appear clearly in financial reports. Yet they accumulate. Recurrent overtime, unplanned expedited shipments, and manual corrections are usually symptoms of poorly designed processes. In day-to-day operations, these micro-costs often prove more persistent than any isolated rate increase.

A recent operational indicator helps explain why. The November 2025 Logistics Managers’ Index showed readings above 50, signaling expansion, with rising inventory costs and pressure on transportation prices and warehouse-related variables. When both inventory and warehousing become more expensive at the same time, every extra day in the cycle, every wait, and every rework carries a higher cost than it did just a few years ago.

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Inventory: Tied-Up Capital With a Daily Cost

One of the largest hidden costs is poorly managed inventory. Excess stock generates storage expenses, insurance costs, shrinkage, and obsolescence. Shortages trigger emergency shipments and lost sales. The problem is not having inventory, but not knowing which portion is truly available, sellable, and in the right place. When accuracy is low, companies end up paying twice: once for the inventory itself and again for the urgency it creates.

Improving visibility and turnover often releases working capital and reduces unnecessary safety stock. The benefit is not only financial, but operational. Less inventory means fewer movements, less congestion, fewer errors, and greater control. In high-volume operations, reducing this friction translates into additional capacity without expanding the warehouse.

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Optimize Before Cutting

Before cutting costs, it is usually more effective to optimize operations. Adjustments to layout, picking rules, picking sequences, and load planning often generate tangible improvements. The key point is that many operations already have the installed capacity to be more efficient, but lose it due to lack of standardization.

Order consolidation is a clear example. When partial loads are shipped because of poor coordination of cut-off times, the cost per unit increases and warehouse operations become more chaotic. By contrast, when order waves are structured, preparation is synchronized, and dispatch rules are improved, unnecessary movements are reduced. These types of improvements typically generate sustainable savings because they remove structural cost rather than simply squeezing suppliers.

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Technology as an Enabler, Not an Expense

Tools such as Warehouse Management Systems (WMS) and Transportation Management Systems (TMS) enable better decisions based on real data. Technology does not reduce costs on its own, but it prevents reactive decisions that make operations more expensive: daily replanning, improvised routes, misassigned priorities, and service promises that lead to constant firefighting.

Service cost also has a financial dimension. A relevant finding from recent warehouse modernization studies shows that 81% of decision-makers believe that failing to meet service level agreements, or SLAs, represents a significant financial burden and must be addressed quickly. Put simply, cutting costs without controlling service levels often backfires, because the apparent savings are later paid for through returns, urgencies, and lost repeat business.

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Saving Without Losing Control Is a Strategic Choice

Reducing logistics costs does not mean slowing down operations or taking on more risk. It means eliminating friction, standardizing decisions, and making better use of existing resources. Sustainable savings usually come from two sources: less variability, which means fewer urgencies, and stronger operational discipline, which means less rework.

Companies that understand this do not just lower costs, they build resilience. In a volatile environment, the ability to absorb change without sacrificing service is increasingly the difference between a supply chain that scales and one that breaks when volume increases.