Top 5 Ways to Cut Supply Chain Costs

When it comes to increasing profits, there are two avenues to choose from; increasing revenue, or decreasing costs. Your business may find that it is in your best interests to increase profits by reducing your supply costs. To get a grasp of where you can cut costs in your supply chain, you must figure out what can be eliminated, improved, or changed to improve efficiency. At SILA, we combine SV3 technology with our hands-on expertise to shine a light on any issues within a supply chain. This enables us to provide our clients with smart solutions based on real-time data and analytics. To get you started, we have compiled our top five tips to cut costs in your supply chain. 

1. Utilise available space

On a micro level, the use of space in the packaging and shipping of your products will make all the difference in avoiding damage or property loss. On a larger scale, how you utilise your space can be extremely important to overall supply chain costs. You are paying for every inch of space in your warehouse or on-site, one way or another. If you are paying for space that is – or could be – empty, you’re throwing money away. 

Plan out a method of storage that is the most efficient, but also the most logical for your organisation. Organise things efficiently and make the most of less space, but be clever about how it’s laid out: if employees are struggling to locate particular goods, your money is wasted on their time also. 

A great example of a storage strategy that is tailored to a particular business model is online retailer Amazon. The Amazon warehouse utilises a system called “chaotic storage.” This is based on barcodes, rather than product category, which allows employees to find items easily and makes operations more accurate and efficient. 

2. Streamline ordering

Make your ordering process as efficient as possible. Firstly, if you’re still using a paper checklist, throw it away and use a single software package for completing orders. This will help avoid situations where employees use different applications and order too much of specific products or supplies. Implementing an approval process that requires consent from designated admins will also help avoid unnecessary orders. 

This won’t work for all businesses, but if you can implement a Just In Time (JIT) inventory management strategy, you can reduce waste and cost from excess stock. JIT is a strategy to increase efficiency and decrease waste by receiving goods only as they’re needed, with the main goal of reducing costs on inventory. 

By having a supplier expedite shipments for your business, you will be able to order closer to the time you need the supplies and order a more accurate number of units. Ordering far in advance incurs warehouse costs, as you have to store the products longer – this accounts for more space, as well as a higher risk that items are damaged or stolen. 

3. Monitor demand

A JIT Inventory management strategy relies on accurate forecasting of consumer demands, meaning you may need to dedicate more energy to analysing consumer demand. Not only will this create efficiency in ordering, but you will also be able to shape your supply chain strategy and structure based on your findings. 

By ensuring you provide customers with what they actually want, you will avoid costs associated with things that they see no value in. Although this sounds simple, companies get it back to front all too often. A great example is offering next-day delivery to all customers – even though not every customer needs or wants it. This wastes money on express transport by “overservicing” some accounts. By only offering next-day delivery to those who actually want it, costs are lowered and customers are more satisfied across the board.

4. Outsourcing

Outsourcing is a great option to consider if you’re looking to improve efficiency in your supply chain. You can bring on board a company to take over a particular process if there is an area you are struggling to improve. Generally, these service providers will specialise in the field, and you will find your efficiency increase immensely. Of course, it’s important to properly research and screen service providers to ensure they can provide enough productivity and efficiency benefit to justify the expense. Under the right circumstances, outsourcing certain processes can lead to significant savings and a well-functioning supply chain.

5. Measure performance

The only real way to see how your supply chain is performing is to measure outcomes and key performance indicators (KPI’s). You’ll have a hard time determining how much you’re improving your processes if you don’t have any idea how you are performing in the first place. Select critical KPI’s to track short and long term to see how you’re doing. Set goals based on these KPI’s, and watch yourself hit them as you continue to improve your strategy.  

You can keep supply chain expenses down by analysing every phase of the process. Break the chain down into its essential elements, and you can see ways to make it work more efficiently. Our team at SILA can show you how using our SV3 system can give you real-time data and analytics to revolutionise your supply chain and enable greater agility and growth.

SV3 stands for SILA Visual 3 and encompasses our systems, people and processes. The combination of these 3 assets allows us to provide a powerful and transparent logistics solution that gives our customers an edge, allowing them to work smarter and faster. 

For more information on how SILA can revolutionise the way you manage your supply chain, head to our website www.sila.net.au or get in touch with our friendly teams in Australia or New Zealand:

Australia
Email sales@sila.net.au
Phone +61 7 3908 1690

New Zealand
Email sales@sila.net.nz
Phone +(07) 3733 2685