Believe it or not, your company’s supply chain strategy contributes more to your normal operating expenses than you might think. Why? Because it’s not as efficient as it needs to be to help you realize savings every month or quarter.
You need to implement cost reduction strategies in supply chain management if you want to see long-lasting results that help you simplify and improve your budget.
Before we discuss the different techniques that can be used to control cost in the supply chain, you need to first understand why it’s so important.
What Is Efficient Supply Chain Strategy, and Why Does It Matter?
So, what is efficient supply chain strategy, exactly? It’s the process of eliminating excess costs associated with your supply chain and its direct impact on your business. This includes the procurement, storage, packing, and delivery aspects of your business.
There are different cost reduction strategies in the procurement process that you can implement and the strategies you use largely depend on your business. But they all have one thing in common: finding ways to save money year after year.
This helps free up additional capital and makes it easier to invest back into your business. The more money you can invest, the easier it is to grow and improve your operation.
4 Cost Reduction Strategies in Supply Chain Management
The exact cost reduction strategies in supply chain management that will work best for your business may be different, and they can change from year to year. But these methods are proven to help you create a cost-efficient supply chain that you can build on and develop over time to scale with your business.
1. Stay on Top of Inventory
Inventory loss is one of the biggest contributors to high supply chain management costs. Every item you misplace or lose due to spoilage or damage is an item that you can’t use to fulfill orders or meet demand.
By monitoring your inventory and keeping track of each item you’re storing, you’ll reduce those costs significantly. Even better, you’ll be able to identify trends that are contributing to loss or wasted inventory, so you can make the necessary changes and start reducing costs.
2. Hire the Right Employees
Your employees can either speed up or slow down your supply chain management efforts. When they’re efficient and process orders in a timely manner, you’ll have a more cost-efficient supply chain. The key is to choose personnel who communicate and keep you aware of any changes and issues as they see them.
When your employees take the time to communicate, you’ll find it easier to implement and develop new cost reduction strategies in the supply chain.
3. Manage Shipping and Transportation Costs
Getting products to the end user is one of the biggest and most expensive challenges your warehouse will face. Trying to figure out how to reduce transportation costs in the supply chain means taking a long, hard look at how you’re sending orders currently.
Running everything through internal departments will cost more. Instead, consider consolidating shipments into larger orders, cutting down on frequency. If that’s not an option, it might make sense to outsource to dedicated transportation companies.
This will lower your operational costs. Even better, you’ll spare yourself the frustration and expense of hiring additional full-time staff to help keep up with demand.
4. Embrace Automation
Automation has a questionable reputation. Many employees see it as a way to replace them, but when implemented appropriately, it can help you create a more cost-efficient supply chain.
Think about the time your employees spend taking care of tasks that a computer could manage. Things like inventory monitoring, order prep, and data interpretation take time. That’s time that your employees can spend in other parts of your business. By automating certain processes, you’ll free employees up to focus on their core duties.
You don’t have to downsize your operation, but by automating certain processes, you’ll save money and can instead focus on retaining the talent you already have in place.
Follow These Simple Tips to Create a Cost-Efficient Supply Chain
Implementing these cost reduction strategies in the supply chain will help you save money month after month. But finding ways to implement those strategies can be overwhelming on your own. Become an Avetta member today and streamline your supply chain management costs the easy way.