When trying to decide how to reduce supply chain costs, where do you look first? For many industrial and life sciences leaders, it all starts with the $118 billion market for logistics and transportation in the UK—especially in the wake of Brexit uncertainty.
But optimising logistics costs only accounts for a subsection of your supply chain. You also have to consider ways of reducing supply chain costs in other areas like procurement, sourcing, and financing.
No matter the current state of your operation, there are many different ways of reducing supply chain costs while maintaining continuity of supply.
HOW TO REDUCE SUPPLY CHAIN COSTS
Even minor improvements in supply chain efficiency can result in multi-million-dollar savings for your business. Embracing these 11 strategies to reduce supply chain costs can help you achieve such significant results.
Rethinking Customer Service Offers
- Streamlining Transportation Processes
- Measuring Performance More Effectively
- Minimising Product Touches in Your Supply Chain Network
- Embracing Network Transformation when Necessary
- Focusing More on Sales and Operations Planning
- Outsourcing Aspects of the Supply Chain
- Utilising Assets for Maximum Productivity
- Improving Labour Management Capabilities
- Investing in Better Warehouse IT
- Maximising Visibility Across the Supply Chain
1. RETHINKING CUSTOMER SERVICE OFFERS
Don’t blindly follow supply chain trends without considering the wants and needs of your customers.
At first glance, offering next-day delivery seems like an obvious way to increase customer satisfaction through your supply chain. However, those costs have to be accounted for somewhere and customers may prefer to save money rather than get next-day delivery.
Designing your supply chain according to customer preferences, demands, and feedback will ensure you’re not wasting money on offers that don’t add value.
2. STREAMLINING TRANSPORTATION PROCESSES
Transportation offers a significant opportunity for reducing supply chain logistics costs. While you can’t necessarily control the ebbs and flows of fuel costs, you can take steps to reduce overall transportation costs and streamline the supply chain.
A few ways to streamline transportation costs include consolidating shipments, using fewer carriers, embracing single sourcing for transportation needs, using crowdsourced P2P transportation services, and more.
3. MEASURING PERFORMANCE MORE EFFECTIVELY
Supply chain performance management shouldn’t be left to just one person. If you want to reduce supply chain costs, KPIs must be tracked across all functional departments in your organisation.
However, effective performance management starts with properly defining KPIs. There’s no one-size-fits-all approach to supply chain KPIs—you need to decide which objectives are most important to your organisation and which KPIs will most-effectively measure them.
Once you’ve defined your KPIs, you can identify new ways that your supply chain can reduce costs as well as increase performance.
4. MINIMISING PRODUCT TOUCHES IN YOUR SUPPLY CHAIN NETWORK
Every product touchpoint between your suppliers and your customers represents added costs and greater potential for mishandling. The fewer touches across your supply chain, the lower your overall costs will be.
Minimising product touches requires strict lead times, an ability to test cost-reduction alternatives, and a willingness to continually evaluate the effectiveness of your supply chain network.
5. EMBRACING NETWORK TRANSFORMATION WHEN NECESSARY
Any time you’re trying to find ways to reduce supply chain costs, you need to understand exactly what you’re spending with existing processes. What are your storage and facility costs? How much do you spend on inventory? What do customs and duties cost you? Understanding every fixed and variable cost across the supply chain will help you determine whether an entire network transformation is necessary.
When you’re designing a modern supply chain network, be sure to consider customer service offers, supply points, current performance, and alternatives for least-cost networks.
6. FOCUSING MORE ON SALES AND OPERATIONS PLANNING
Is your inventory obsolete? Do you frequently change demand plans? Does your business struggle with forecast accuracy?
If so, you might be able to reduce supply chain costs in the sales and operations planning (S&OP) phase. Rather than taking a set-it-and-forget-it approach to S&OP software, spend more time focusing on how you can get the processes running smoothly. Getting all functional departments across the supply chain on the same page can significantly reduce costs.
7. OUTSOURCING ASPECTS OF THE SUPPLY CHAIN
Outsourcing is nothing new in the world of supply chain management. The vast majority of businesses outsource at least a portion of the supply chain—often in warehousing and transportation.
But hiring third parties to handle aspects of the supply chain doesn’t automatically reduce costs. You need to find the right partner with the right services to reap the benefits.
One option is to outsource your tail spend management to reduce costs and complexity. When you outsource tail spend management, your partner assumes full responsibility for the procurement, management, and supply of inventory from non-core vendors to manufacturers on demand. Rather than dealing with inventory carrying costs, supplier interaction costs, increased non-compliance, and other challenges, an alpha supplier like Exertis SCS can offer techniques, such as:
- Vendor consolidation
- Price matching
- Distributor bypass
- Lead time maintenance
- And culprit management
With these services, we helped one global med-tech firm reduce procurement costs by over 20%.
As you look for ways to reduce supply chain costs, don’t underestimate the value of strategic outsourcing.
8. UTILISING ASSETS FOR MAXIMUM PRODUCTIVITY
Consider all of the assets you own across the supply chain—distribution centres, warehouses, vehicle fleets, mechanical equipment, etc. Any idle time for these assets within a 24-hour period represents a way to reduce supply chain costs.
By rethinking asset utilisation, you can maximise productivity throughout the supply chain and ensure there’s no wasted time (or money) at any stage.
9. IMPROVING LABOUR MANAGEMENT CAPABILITIES
Automation is top-of-mind for any decision maker looking for ways to reduce supply chain costs. But reducing staffing levels isn’t the only way to cut costs.
Increasing labour force management efficiency will save you money even if you aren’t cutting staff. That means improving employee communications, conducting better market demand analysis, understanding seasonal trends, and more.
10. INVESTING IN BETTER WAREHOUSE IT
Technology isn’t just a means of reducing employment costs. The right investments can increase workforce productivity and present new options to reduce risk in the supply chain.
Implementing RFID technology for inventory tracking, robotic equipment, IoT devices, and advanced warehouse analytics can all reduce supply chain costs.
11. MAXIMISING VISIBILITY ACROSS THE SUPPLY CHAIN
Each of these strategies to reduce supply chain costs relies on your ability to maintain full visibility at each stage. Without visibility into all processes, you risk sacrificing continuity of supply as you work to reduce costs. And when you sacrifice continuity of supply, any cost savings will be for nothing.
Ensure that your supply chain offers complete, timely data as products progress and centralises data for efficiency management.
In some ways, supply chain visibility is a technology challenge. But it’s also a strategic challenge. It’s always a good idea to identify ways to reduce supply chain costs—but only if your tactics culminate in an efficient strategy that maintains continuity.
If you need help designing a supply chain that delivers the lowest possible total cost of ownership (TCO) for your inventory, contact us today and find out how Exertis SCS can help.