29 Dec Lowering supply chain costs
Executives of manufacturing companies are always looking for ways to reduce the cost of their supply chain. If they can somehow lower the amount of money and time it takes for a product to go from the developmental stage to manufacturing into the hands of consumers, the executive can raise profits and expand the company. The supply chain is the key to entire business, so lowering those costs – while still manufacturing high-quality goods – is a tricky task.
According to manufacturing.net, the supply chain takes up between 50 and 70 percent of a company’s total costs. Given that type of investment, developing a strategy for lowering expenses is both important and complex. Weighing the risks and rewards of any sort of move requires a great knowledge to how the chain operates, as well as a clear vision of the end goal.
There are ways, however, to reduce the costs of a supply chain without taking too large of a bite out of productivity. Understand how these tactics could boost a business’s production output and its bottom line.
Reconfigure the supply chain design
One reason a business may not be generating as much profit as projected may not have anything to do with the products you’re selling or the prices you charge. Instead, it could be the layout of your supply chain. Work may be going slower or not as efficiently as it could because workers are not in the best position to succeed.
According to Lora Cecere, the founder of Supply Chain Insights, only 22 percent of businesses actively design their supply chain. The rest just let the chips fall where they may, so to speak. Writing for Forbes, Cecere stated that executives should examine factors such as the function of the inventory, the alignment of suppliers and the design of the channel. By creating a specific plan, a business is allowing its workers and equipment to be more efficient.
Eliminate false savings
Many business owners fall into the trap of paying more for shipping and transportation in lieu of keeping more goods in-house. These executives are so desperate to keep their shop floors clean and their inventory low that they are willing to overspend on express shipping or storage elsewhere. However, all of that is factored into the supply chain costs and may be one of the reasons why a manufacturing company may not have generated the profits they expected, Inbound Logistics explained.
Calculating every aspect of the business, including transportation, storage and express deliveries, will give you a better understanding of the supply chain costs. It may turn out that the amount your company is paying to ship goods quickly instead of keeping an inventory is a gross negative expense. These false savings can doom a company and its supply chain if not corrected quickly. Make the decisions that are best for your company as a whole, not the ones that are just assumed to be the smartest choice.
Examine shipping policies
Manufacturing.net explained that by taking a smarter approach to their delivery process, a manufacturing company can lower total costs of the supply chain. From shipping more in bulk to using smarter visibility software that tracks how much of a product is being sold, the advanced ways of thinking will prevent a business from wasting its time, money or resources when trying to deliver its goods.
Use the cloud
Having software that tracks supply chain costs and can identify specific problem areas to fix can help you make the necessary changes before it’s too late. With so much going on, it can often be difficult to spot areas that are lagging behind, which is why having advanced technology that is tied to every aspect of the chain is valuable.
NGIMES, by Atachi, does just that for a manufacturing business. With rapid response times and real-time visibility, you are able to see what issues a supply chain is having and make the corrections right away. By providing instant access to important data, NGIMES is a must-have tool for business leaders who are looking to lower their supply chain costs and improve their manufacturing production.