Key Takeaway: How can logistics companies effectively reduce overall societal logistics costs?

Release date:

2024-04-07

Author:

Jinhua Logistics

At its core, logistics is about service. The logistics industry’s cost‑optimization objective has never been to achieve the lowest possible costs; rather, it seeks to minimize total supply-chain costs while maintaining a predetermined level of service.

Recently, in response to the national initiative to reduce logistics costs across the entire economy, Mr. Wang authored “A Roadmap for Effectively Reducing Society-Wide Logistics Costs ( An article titled “2004)” has had a significant impact. The piece reiterates Old Wang’s long‑standing view: China’s overall logistics costs are high, yet the cost of logistics itself is relatively low; therefore, reducing society‑wide logistics expenses hinges on systemic change and requires efforts that go beyond mere operational adjustments. The focus should be on shrinking the scale of logistics activities per unit of GDP, with concerted action across the entire economy—adjusting the economic structure, advancing reform, and pursuing high‑quality development—to curtail unnecessary logistics operations. If the key to lowering society‑wide logistics costs lies in societal-level reforms, does that mean logistics enterprises have nothing left to do? Not at all. Old Wang believes that logistics firms still have ample room to contribute. As early as last year (early 2023), he advocated for a new mindset among logistics companies in the new era—one that emphasizes cost reduction and efficiency gains—and outlined a fundamental roadmap for high‑quality development in the sector. This roadmap centers on delivering high‑quality logistics services, with two core principles: reducing costs for customers and enhancing profitability for the enterprise. Reducing costs for customers means integrating into industrial and supply chains, thereby cutting circulation, inventory, channel, financing, and cargo‑damage expenses from the perspective of lowering overall social logistics costs. At the same time, logistics providers should share the benefits of these cost reductions with their clients, raise service pricing accordingly, and appropriately increase the cost of logistics services. Guided by this basic framework, Old Wang shared several exemplary cases and innovative approaches—steps that reflect the inevitable demands of high‑quality logistics development.
It is particularly important to emphasize that the essence of logistics is service. The logistics industry’s cost‑optimization objective has never been to achieve the lowest possible costs; rather, it seeks to minimize total supply-chain costs while maintaining a specified level of service. This “optimal” outcome depends on the company’s specific logistics strategy: even at the same service level, the optimal cost structure must be determined in alignment with the strategic priorities of the enterprise. Factors such as emergency response capability, rapid‑response agility, logistical resilience and safety, and network coverage are all critical elements that must be factored into and prioritized within a company’s logistics strategy. Accordingly, under a given service‑level framework, companies should integrate these strategic imperatives, assign appropriate weights, conduct a comprehensive analysis, and only then arrive at the most suitable cost‑optimization target. Below is… Conference presentation PPT, for your reference!