You don’t need to be a corporate giant to save immensely on supply chain costs. Profits for your company can rocket upward if you achieve sufficient savings in supply chain costs. This blog would discuss ways to offer a compelling saving opportunity for companies of all sizes across all industries.
The most important factor is to know the scope and variability of the type of customer’s business, for example, big volume and small volume, large orders and small orders, frequent deliveries and less frequent deliveries, special handling needs, temperature control, across city or interstate…. The list goes on. Understanding these dynamics can help you structure your services to meet up with their needs at a practical cost.
Customer service
Give customers what they really want, not what you think they want. This is quite straight forward, provide customers with what they need and avoiding adding costs of things for which they see no value. For example, offering next day delivery to all your customers, even though not every customer needed those services. This is money wasted on express transport. Rather why not have a systematic pattern, for example, on Monday we deliver to the North, Tuesday we deliver East, Wednesday we deliver South and Friday we offer emergency deliveries.
It is crucial to recognize that when customers see value at a particular level of service, they would be happy to pay for it. As a result, more sales, more profits, and more customer loyalty.
Supply chain network design
Keep costs down and designing your network reliability up by to minimize product handling. Now, this is split into two: your customers and your suppliers. By way of explanation, the services you provide to your customers are on one end and on the other end the location of your supplier. This would dictate where you hold stock to service your customers. For example. If the supplier is farther away, the more unreliable the network is, as a result, the more stock needs to be held in at your ends to ensure service continuity. But this is something you want to avoid as much as possible, to avoid the risk of errors and damage.
Inadequate network design can lead to excessive handling, too many stock locations and poor customer services. Therefore, it is very important to establish customer locations and lead time, establish supply points, identify network performance and service performance.
Outsourcing
Both parties can benefit from a healthy and promising partnership. Over 75% of businesses outsource some part of their supply chain operation. The two majorly outsourced departments are warehousing and transportation. The reason for this arrangement is that most company believes the company will save money by outsourcing. Yes, this can come into perspective if the service provider is more efficient in operating the required duty than the company is. Money is not the only element that is being saved, other reasons can also be factored in, such as growth in the operational section, less distraction in management, more flexibility in the cost and service structure and less investment on assets. Both parties are happy.
Asset Utilization
Maximize your assets to the fullest potential. For example, instead of making very early morning deliveries and leaving their truck fleets idle for the rest of the day, why not spread deliveries out during the course of the day. Some customers would be willing to take deliveries in the day and others later in the evening.
Performance Measurement
Measure what is strategically important so that you can manage and improve it. At the end of the day, what really matters is your “end game”. Measure your performance, not your targets. Different organizations would have different key performance, what works well for one may not be relevant for another, so resist the temptation to copy what another company uses. Set up your objectives and target.
In almost every company, at least two or three are likely to be worth investigating for potential improvement. The most basic principle for effective supply chain management is understanding customer needs.
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