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3 Ways to Cut Supply Chain Costs

3 Ways to Cut Supply Chain Costs

Supply chain management refers to the process of coordinating the flow of goods from the source to the customer or the end-user. It requires the ability to forecast the various stages of the supply chain accurately and plan for the various contingencies that may occur along the way. This can be done through the use of planning and forecasting tools.

Transportation costs are major for small firms, especially for small firms selling to large firms. This is often overlooked, but it is the cost that small firms pay to deliver their products to their customers. When you’re dealing with lots of small firms needing to send terabytes of data around the globe, even a small percentage of costs can lead to huge losses.

Supply chain management is a critical element of business success. It is also a cost center for most companies. It’s no secret that the cost of goods produced far exceeds the amount of money spent on them. 

The following are three ways to cut supply chain costs.

Reduce costs in the supply chain. 

In recent years, supply chains have been changing with companies seeking to enter new markets and lower costs to obtain a competitive edge. But these changes are also placing an additional strain on the supply chain, with automakers, for example, warning that rising production costs and the complexity of global supply chains are threatening profitability. As a result, the need to reduce costs in this area is becoming increasingly important.

There are several types of supply chain costs that can be cut along the supply chain, including:

  • Transportation costs (the most expensive type of supply chain cost)
  • Inventory storage
  • Materials storage
  • Labor
  • Risk
  • Management

Reduce the cost of goods sold

Most companies are overwhelmed by supply chain issues. The cost of goods sold (COGS) is rising as more parts, materials, and services are being required to make the products, especially as the economy is slowing and demand decreases. The rise in COGS is primarily due to the need for products to be delivered faster than ever before, to be more flexible to meet customers’ changing needs and satisfy rising quality standards. Supply chain managers and executives are always looking for ways to reduce the cost of goods sold on their supply chains. Whether it’s reducing lead time, shipping costs, inventory carrying costs, or improving the efficiency of their distribution centers, they are constantly trying to find ways to reduce their supply chain costs.

Reduce the value of goods returned.

In many supply chains, the cost of goods returned is a significant percentage of the total supply chain cost. In many cases, the cost of goods returned is grossly unprofitable from a company’s perspective. One of the most important aspects of supply chain management is managing inventory. The most obvious way to reduce inventory costs is to have fewer items in stock, especially when you are purchasing raw materials from suppliers. However, there are other ways to reduce inventory, as well. These include: (1) reducing the time items are in stock; (2) reducing the number of units that are in use; and (3) reducing the value of goods returned.

The supply chain is the lifeblood of your business—it’s the lifeline that keeps your company running. That’s why every company spends so much time and money on it. The problem is that too many leaders are so focused on cost-cutting that they ignore the most effective ways to reduce waste and improve performance.

The supply chain has changed from a linear process of receiving goods from suppliers and shipping them to your store to an integrated network of suppliers, distributors, customers, and retailers. Many of the supply chain issues we face today involve coordination among all of these stakeholders, and the new paradigm is no different. However, there are ways to improve efficiency and reduce costs through knowledge management, better supply chain visibility, and using the right tools.

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