by Joe LaMantia and Ron Quick
Supply chain costs are increasingly being targeted for reduction due to the potential benefit to profitability. Businesses simply have to invest in this key aspect of operations to receive raw materials and components consistently, produce inventory efficiently and confidently deliver finished products to customers.
Strong supply chain planning, management and tools help businesses just like yours reduce costs and enjoy the many benefits that come with more efficiency and less waste.
The obvious issue with costly supply chains – reduced profitability – is clear to many stakeholders and leaders. Other problems, which can be even more harmful, may not be. Some serious problems that come along with a costly supply chain but aren’t always immediately visible include:
Five straightforward actions can help build momentum as your organization works to realize the big-picture benefits of a cost-efficient supply chain:
A supply chain strategy is key for targeted growth and sustainable reduced costs. Businesses may draw on their own internal expertise or work with an outside expert to develop a plan that addresses their own unique needs.
One key component of a supply chain strategy is the right technology.Technology is absolutely necessary when it comes to cost reduction. Portals for communication among your business, suppliers and customers are vital in terms of reducing timelines, avoiding errors and cutting down on the time staff spends on processes that could be automated easily. Data analysis is another key consideration. While the standard ERP systems collect huge volumes of data, they don’t generally offer streamlined, simple and effective access to actionable information. Identifying everything from early and late deliveries to excess inventory and problems with suppliers makes supply chain improvement actionable. The right technology gives your organization the power to make informed decisions about major issues and opportunities while improving the insight and productivity of staff.
Education and company culture must also be prioritized in this context. The best possible strategy and technology can only do so much if staff don’t understand how these changes benefit the company as a whole and their own tasks and responsibilities. Business leaders need to provide the necessary training on specific tools and new processes and celebrate early and longer-term wins.
Finally, businesses must also include their suppliers and customers in the improvement process to ensure areas where collaboration is necessary for change are properly addressed. Early outreach that explains new workflows and the strategy behind them can go a long way.
Cutting costs in the supply chain will translate into short and long term benefits for your business. Quick improvements, like addressing communication issues and automating manual processes, increase efficiency, reduce supplier-lead time and improve inventory management.
To remain competitive, your business must address issues in its supply chain and remove unnecessary costs.