Kevin Ian Schmidt

The Seven Biggest Opportunities for Cost Savings in a Supply Chain

Within supply chains there are areas that some would call the “seven deadly sins” (according to quite a few articles I have read), but I would prefer to see these as cost saving and improvement opportunities that would make a supply chain more competitive. They are in short the ability to reduce overproduction, the ability to eliminate delays or waiting times, the ability to cut out any form of unnecessary transportation, the ability to reduce any kind of motion that people engage in that is unnecessary, the ability to reduce inventory, the ability to optimize the use of space and the ability to minimize the corrections needed or returns handled.

7 Biggest Opportunities for Cost Savings in a Supply Chain

  • Mismatched processes. Within an overall process, such as order supplies and produce finished goods, there may be several different processes, such as the supplier’s own process to deliver, the reception and stocking process within the client enterprise, and so on. If the end of one process does not dovetail with the beginning of the next one, there may be interruption and duplication of work, both of which increase costs. For example, if a supplier’s product codes or pallet sizes do not match those used by the enterprise, products will have to be recoded and reorganised. In the consumer packaged goods sector, this problem is big enough to have prompted the use of collaborative planning, forecasting and replenishment (CPFR) between manufacturers and retailers. The same idea can be applied in other sectors too.
  • Streamline Ordering Process: You need to make your ordering process as efficient as possible. This means at least a couple of things. Use a single software package for completing requisitions or else you might encounter situations where employees using different applications end up ordering too much of specific products or inventory supplies. Another thing to keep in mind is that you need to implement an approval process so that nothing gets ordered without the consent of designated officials.
  • Transportation: Reducing your transportation costs can also boost your supply chain savings. Developing a transportation strategy allows you to consider multiple factors that could lead to reduced costs including, but not limited to, crowdsourced P2P transportation services, in-house product movement via drone, and on-demand shipping container services. From autonomous semi-trucks to warehouse robots, the world of transportation is changing. The more you pay attention to each aspect of your transportation strategy, the better positioned you are to discover cost-saving opportunities.
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  • Outsourcing:Outsourcing is one option you can consider if you want to reduce supply chain costs. Of course, you’ll need to conduct proper due diligence to ascertain whether or not service providers under consideration have the ability to provide enough of a productivity and efficiency benefit to justify your out-of-pocket expenses for such services. Under the right set of circumstances, an outsourcing arrangement can lead to substantial savings and a property functioning supply chain.
  • Inventory Management: A well-honed inventory management strategy is crucial for decreased supply chain costs. Everything from incorrect stock picks and tracking errors to under-stocking and over-stocking can influence warehouse profits. A sound inventory management strategy includes multiple factors like a procurement plan and failure analysis (for when the inevitable mistakes happen). Without a clear plan in place for each aspect of inventory handling, you can’t spot inefficiencies or uncover potential cost savings. From preventing product theft to drop-shipping partnerships, each aspect of your inventory supply chain needs to be examined.
  • Make Better Use of Space: Making the most of the space you have will save you money at the end of the day. As you no doubt already know, storing inventory and supplies in your warehouse comes at a cost. Assess whether or not you’re making the most of the space you have. You just might discover that you could save some money by finding a space that’s more in line with your actual needs.
  • Supplier Management: If there is a cost that is almost immeasurable, it is when your supplier is unexpectedly unable to deliver. By working more closely with them and their systems, you can see the drop-outs before they happen and take steps to manage your lead times.
        • Use Multiple Suppliers: If you only use one supplier, you are eliminating competition for your orders. Find several suppliers who can compete on price, and use several of them at all times so you can avoid costly delays in receiving products. If one supplier is out, another may have the items. Using multiple suppliers protects you from spending money for less-than-satisfactory service.

There are a myriad of opportunities. Those astute enough can employ techniques to cut all the wasteful practices and emerge as market leaders. It takes conscientious monitoring and management of your supply chain though.

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