Reducing supply chain/logistics expenses is often the first priority for a business’ profitability. Companies use a mix-and match of techniques and processes that help them reduce costs and can range from using better shipping networks, using technology over manual processes, optimising inventory levels to enhancing 3rd party/ supplier relationships etc. Here are some tips on how you can curb your supply chain costs:
Tip to curb supply chain costs
#1 Identify & reduce open spaces
This should be followed very diligently and meticulously; it drives these business outcomes:
- It increases the storage capacity in racks and bins as it improves bin re-profiling and vertical space utilization
- Reduces freight costs as there is an improvement in truck utilisation.
- Better utilisation of the available warehouse/storage space to up the storage density.
- Reduces damage to any case-picked pallets as it eliminates movement while the goods are in transit.
- Encourages better-organised operations that are directly connected to labour, inventory accuracy and efficiency asset utilisation.
#2 Certain service improvements are able to bring down logistics costs
Focus on process improvement that will help cut down errors and rework. These will help save your company a significant amount of money. It will also improve the quality of service you provide customers.
#3 Abstain from over-serving
Most companies don’t realise that when they maintain excessively high service levels, it does their business more harm than good. This is a very common mistake that many organisations make and it unnecessarily bloats their supply chain costs. For example, if you are promising customers a 24-hour delivery schedule, the first thing you need to be asking yourself is whether they all actually need and expect that service. It’s quite possible that many would be happy even with a 48-hour delivery timeframe and it means you are over-serving them.
This is why it’s important that you connect with your customers and get their feedback on the matter. You might find that many of them may not have the shorter timeframe expectation and many others may be willing to change to a longer lead time; this will go a long way in reducing your supply chain costs.
#4 Forecasting is important
Regardless of the business you are in, unpredictability proves to be one of the major supply chain drivers. When you focus on improving the accuracy of forecasting customer demand, it helps you control your operational costs in a much better way. You should have a good understanding of how your business functions and make it a point to use efficient and proven forecasting software; it will help you forecast the peaks and troughs in the demand and can also help significantly in avoiding blowouts in transportation & inventory costs.
Aim for long-term value
It’s extremely challenging to strike the right balance between maintaining high service levels and reducing supply chain costs; but it isn’t impossible either. Even as you incorporate various cost reduction measures into your logistics and other processes, it’s never a good idea to be cheap and look for rock bottom prices for everything. Rather, your priority should be to make every financial decision with long-term value in mind.
You should also sensitise your employees and have regular training upgrade sessions where they are educated on how to avoid wastage and improve productivity. This too goes a long way in reducing your supply chain costs.
For effective and sustainable cost reduction solutions & efficiencies that will increase your bottom line, contact the experts at Benchmark Cost Solutions at this number – 02 9525 0777. If you prefer, write to us at this email address, and we will revert quickly.
Thanks for reading,
Benchmark Cost Solutions Team
02 9525 0777
