In logistics, an avoidable cost is the cost of an activity that can be avoided if that activity is not performed, resulting in a monetary savings. Avoidable costs are typically variable costs, while most fixed costs are unavoidable. Avoidable costs can include things such as labor costs or packaging. As an example, within a warehouse, organizational tools such as racks, are unavoidable. However, upgrading to the high-end, most expensive racking solutions is an avoidable cost when general, less-expensive racks would work.
Penske Logistics
Solutions
Search
X
ClearChain
®
Technology Suite
Streamline supply chain complexities for optimal network efficiency.
ClearChain
®
Control
Take your supply chain to the next level with end-to-end visibility, orchestration and control.
Secure Your Data
Our data security solutions monitor systems, information and those who access and view data.
Increase Your Visibility
Our technology suite allows users to know what is happening at the touch of a button.
Improve Efficiency
Drive efficiency, increase sustainability, optimize the supply chain and reduce your risks.
Automotive
Our years of experience prepared us for managing the logistics required for the changing automotive industry.
Chemical
Penske has a background of improving supply chain efficiency for leading chemical, paint and agricultural products companies.
Consumer Products
Allow us to enhance your consumer products supply chain through efficient, cost-effective solutions that give you more visibility.
Food and Beverage
We offer a range of services to transport your products from farm to market, to arrive safely, quickly, and fresh through specialized systems, transportation, and warehouses.
Healthcare and Medical Supplies
We know it's critical for you to have visibility into the safe and timely distribution of healthcare products, medical supplies, and medical devices.
Technology and Electronics
Custom solutions for global supply chains, delivering parts and products through agile distribution and transportation solutions.
Industrial
Manufacturing
Manufacturing
We create solutions to support manufacturing and manage your inventory across global networks, all while reducing costs and driving efficiency.
Paper and Packaging
Penske can help identify and trim logistics and transportation costs while retaining superior service and on-time delivery.
Retail
From big box to convenience stores, we serve the delivery and supply chain needs of leading major retailers.
Resource Library
Explore a diverse range of articles, case studies, e-books, industry reports, and news from our logistics experts.
Logistics Industry Reports
These reports are widely used by supply chain and logistics professionals as the benchmark for U.S. logistics activity.
Case Studies
Review our supply chain management case studies to see how we've helped major corporations overcome logistics challenges.
Logistics Glossary
Find the most up-to-date definitions for Penske Logistics terminology.
Leadership Team
Learn about the leaders of Penske Logistics, a global logistics solutions provider. Explore their backgrounds, roles, and insights into the industry.
Global Reach
Penske is a large global logistics solutions and services providers, offering local management to meet your needs.
Environmental Sustainability
As a leader in transportation and logistics, we recognize our environmental responsibility to provide sustainable logistics solutions.
Press Releases
Discover our achievements, including expansions, improvements, and partnerships. Explore press releases from Penske Logistics.
News and Stories
Stay informed about key industry news and Penske Logistics updates through our blog posts.
Awards
Our partners and industry organizations have recognized us for providing outstanding logistics services.
Request Information
Call 800-529-6531
Give us a call or send us a message. We want to hear from you.
Request for Proposal (RFP)
Let's begin a dialogue. Send your requirements and a Penske representative will contact you.
Become a Carrier
Develop a partnership with Penske. Our agents are ready to go to work for you.
Join Our Team
Advance your career with an organization committed to integrity and innovation.
cost avoidance Articles
There are three fundamental approaches to reducing and controlling supply chain costs: avoidance, mitigation and improving performance. Understanding each helps companies to decide which is more likely to deliver the most bang for the buck within their supply chains, and what measures need to be taken to capture the full benefits.
1. Avoidance
Cost avoidance is achieved through structural change in the organization, explains Tracy Urbanski, senior vice president of operations for Penske Logistics. "You might have employees who are focused on, say, transportation management, but the team is not centralized or coordinated, and there is an opportunity to deploy them more effectively," she says.
In such cases, the company must pinpoint the gaps in organizational performance and identify best-in-class solutions. Often, it is easier for the company to explore these options with a third-party logistics provider (3PL) than to undertake an in-depth review internally. Outside eyes can offer a unique perspective that may be difficult for people entrenched in the day-to-day to see and may also offer insight gained from working in other industries.
Another route to cost avoidance is to review and rationalize the enterprise's technical resources. For example, rather than making significant investments in advanced transportation management system (TMS) technology, an enterprise might choose to outsource that function and engage a system managed by a 3PL. When companies work with Penske, "they can take advantage of the investment dollars in our system and the in-house expertise we have to run it," says Urbanski. This approach can be especially advantageous when existing solutions are not delivering sufficient value. An example is a software-as-a-service solution that fails to provide the analytics or data visualization features required to support the company's supply chain management goals adequately.
2. Mitigation
Mitigation measures address issues before they impose an unnecessary cost. "We might provide better network visibility tools that enable the company to track inventory more efficiently and reduce the amount of product it has to handle and store," explains Urbanski.
Other cost mitigation strategies might be increasing the reliability of a distribution network, or using predictive analytics to streamline decision-making in the supply chain. Raising the efficiency of a distribution network can translate into improved on-time delivery performance and hence dollar savings in the form of reduced penalties for late deliveries.
Better decision-making delivers cost savings on many fronts. Consider, for example, a company that is preparing for a peak in demand. The ability to make more informed decisions helps the company to secure carrying capacity for the surge in shipments ahead of time "at more competitive rates compared to what they would have paid without the intervention," Urbanski says.
3. Performance Improvements
In this approach to cost reduction, companies can focus on the current state of the supply chain and opportunities to improve performance.
Network optimization falls into this category of cost savings. There are several ways to approach this strategy. Evaluating the entire network — including sourcing locations and product demand — drives performance improvements by, for instance, analyzing which warehouses stock which products and which routes are the most efficient.
Another option is to create what-if scenarios to determine how altering certain elements — specific suppliers or cross-docks, for example — impacts costs and transportation. A third possibility is to leverage improved communications to increase visibility and capture efficiencies through, say, better ways to build loads.
Dynamic routing, the load tendering process, and sourcing strategies are other primary areas that are often ripe for improvement in the quest to cut costs.
Penske is often able to employ leading-edge technology to help customers discover cost savings they may be overlooking.
Planning the Road Ahead
Choosing which approach, or combination of methods, to pursue depends on the shipper's goals and the nature of its business and organization.
"Companies that are decentralized can present significant opportunities for cost avoidance," says Urbanski. The company's time horizon sometimes impacts which approach to take. One enterprise might aim to capture short-term cost savings; another has mid- to long-term targets that can be realized by relocating distribution centers to meet customer needs better. "In general, we work to deploy all three cost management strategies," Urbanski says.
Whichever track companies take, they need to be aware of what's involved in advance if they are to derive maximum value from the exercise.
Mitigation, for instance, is inherently forward-looking, and it helps if companies are "open to change and to viewing how success can be delivered by working with different tools and working through change management challenges," notes Urbanski.
In cost avoidance, it's important to "spend time to understand the organization and what people do," she says. It might be necessary to delve into the fundamentals of operating a freight network and what different processes accomplish. "Companies that do this often experience the biggest transformations," Urbanski says.
The investment in time and money can be significant — but so are the potential cost savings.
[Read more...]Show less
Loading posts...
Customer Service
Our Businesses
Penske Resources
© 2026 Penske. All Rights Reserved.