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Monday, December 6, 2021

How Effective Supply Chain Management Can Reduce Operation Costs

Did you know there are ways of increasing business profits without even making sales? Making sure your business has an efficient and streamlined supply chain can reduce operational costs and save your business money in the long term, without putting any work into finding new leads or selling more units. 

What is effective supply chain management?

Effective supply chain management is all about finding the quickest and most affordable way to procure, store and transport products and materials from suppliers to manufacturers to customers. Though part of this includes finding cheaper options for suppliers and service providers, that’s not the be-all and end-all. There are many more ways of reducing operational costs through effective supply chain management.

1. By Creating a Supply Chain Strategy

Before you even start looking at your supply chain in detail, take a step back to look at it as a whole. What is your business’ supply chain strategy? What do you want to achieve with your supply chain? Who is your supply chain in service of? Being able to answer these kinds of questions will help create a solid framework around which to base your management decision-making.

An effective supply chain strategy should involve all aspects of the business. Everything from purchasing and manufacturing to sales and marketing depends on an efficient supply chain to function properly, so it’s important that their goals and requirements are involved in your supply chain management. 

2. By Identifying Inefficiencies

Effective supply chain management is all about looking at every stage of the process and seeing the sticking points that are slowing things down. Rather than overhauling the whole process, tackling these individual points of the challenge will make a much bigger impact and take far less time to solve. Some businesses find working with supply chain management consulting a great way to identify inefficiencies in their processes that they can improve upon.

Start off by looking at how you process transactions. If you use external providers, what delays and costs are associated with these? Are there other ways you can speed up this process? More efficient transactions can get the ball rolling on other processes quicker, resulting in less time lost. Then continue to analyze each stage of the product journey. When you look at your supply chain, see if there are any parts of the process that have become bottlenecks. Any point in the process where complicated processes or manual input forces transportation to slow down is an inefficient point that could be improved. How does your supplier ship materials? When materials arrive at the manufacturer, does that affect order fulfillment rates? The more detail you can go into, the better.

3. By Maximising on Space

Product storage is often one of the sticking points of the supply chain journey. In order to grow you need the capacity to make and sell more products. In order to do that, your business needs more space to store materials and products before they are shipped to customers. More space costs more money, reducing the maximum profit you can make by expanding.

Effective supply chain management involves assessing your warehouse capabilities and identifying any ways you can store more products without spending more money. Think about ways you can reorganize your inventory or redesign your products or packaging. A few years ago, Sainsbury’s was able to avoid 500 delivery trips per year by reducing the diameter of their toilet roll inner tubes by 11mm. Even a tiny alteration in size or shape could make a significant difference when scaled up to thousands of products.

4. By Optimising The Supply Chain Network

Every supply chain involves a certain number of touch points, where products change hands, usually with some manual input. Each of these touch points slows down the movement of products, and carries the risk of product damage or human error, resulting in a loss of stock and, therefore, potential sales. 

To avoid as many touch points as possible, look at all of the touch points in your supply chain network and think about how you can avoid them if possible. You might find that you are storing two essential materials in different locations, and they could be transported together. Or, you might find a warehouse closer to your manufacturing location that could reduce trip time and avoid unnecessary delays.

5. By Investigating Automation

Automation is a buzzword heard around many businesses at the moment, so it’s no surprise it’s a feature of effective supply chain management. Both the inefficient sticking points and supply chain network touch points can be avoided with an increase in automated processes. Reducing human error where possible is a sure-fire way to create a slicker, more streamlined supply chain with fewer errors.

Automation can come in all shapes and sizes. It might mean using automated machinery to load and unload transport trucks, or it could be using software to check for product discrepancies and defects. If you don’t know where to start, approach supply chain management consulting to discuss how automation can make your supply chain more efficient.

6. By Focusing on the Customer

Of course, as with any other part of your business, everything in your supply chain should focus on the needs of the customer. Any decision you make about how to optimize your supply chain should consider what impact it could have on customer satisfaction. For example, you may try to save costs by chasing cheaper transport options or suppliers. But, if the new, cheaper products and services aren’t satisfactory to the customer, you will lose any money you save on addressing their complaints, receiving their returns, and losing their custom.

Think about how your supply chain can be a benefit to the customer. Can you find a supplier that offers next-day delivery at an affordable rate? Could you take the Amazon model and offer free shipping with a subscription package?

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Kiara Dawson
Kiara Dawson comes from an Engineering background, with a specialization in Information Technology. She has a keen interest and expertise in Web Development, Data Analytics, and Research. She trusts in the process of growth through knowledge and hard work.

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Business Upside eMagazine
Business Upside eMagazine
Business Upside eMagazine