You can easily save millions of dollars annually by reducing your supply chain costs. And even better – opportunities exist in every supply chain.
What should you look for?
Here’s several areas that can benefit nearly every business in any industry:
- Give Customers What They Really Want – Not What They Think They Want
Yes, this principle sounds so simple in practice. But it’s not nearly as easy as it sounds.
For example, one company offered next-day delivery to its customers. Sounds good, doesn’t it?
Well, after researching the issue further, they found not every customer actually needed or wanted this. So, they were wasting money by giving extra service that didn’t provide any additional value.
Or, one distributor would satisfy customer complaints with a free delivery offer. This cost them around $500,000 yearly. But, the problem was they didn’t solve the underlying issue causing the complaints.
A few simple changes would eliminate the need for free delivery. Don’t put a Band-Aid on a broken leg!
By far, the most frequently outsourced parts of the supply chain are warehousing and transport. However, you don’t always actually save money. So, you have to remember to conduct audits to see how much your outsourced services would cost you versus doing them yourself.
Don’t forget the needs of the company providing service to you! You can ask for price breaks – but the relationship goes both ways and you have to make sure they profit too. So, take an active interest in being a good customer and make sure your service provider benefits also.
One potential area for efficiency improvement could lie in your freight rates. For example, if your service provider charges you per truck, that doesn’t incent them to utilize their fleet efficiently. But, if you change that to a per-pallet rate, the game completely changes into a win-win scenario.
- Utilize Your Current Assets
What assets does your supply chain have? Vehicle fleets, facilities, and inventory under your control must be used as frequently as possible. The more they sit, the more they cost – while providing no return on investment.
For example, a bakery retailer once used their trucks just in the morning – allowing them to sit idle the rest of the day. To make more efficient use of their fleet, they spread deliveries throughout the day – and serviced customers willing to take deliveries in the evening.
And a large beverage manufacturer would experience a peak in volume around Christmas. Rather than owning a warehouse all year long and paying for empty space, they rent for a month or two.
So when was the last time you studied your supply chain? You may have all sorts of savings opportunities sitting right under you.
Learn what you can from these tips – and how they might help you save millions over the next year.