Your supply chain is like any other functioning piece of machinery. It requires careful co-ordination and regulation of a large variety of factors plus careful planning. However, even the best laid plans can go awry from time to time and the results may be a significant increase to your supply chain costs.
Needless to say, if you want to succeed as a business in today’s competitive global economy, you want to keep costs down as much as possible.
So what are the factors that lie behind increased supply chain costs? There are at least four that you should be aware of and keeping them in mind will help your company keep supply chain and logistic costs under control for many years to come.
Overcutting Your Costs
Times have been very tough for business over the past few years and it’s tempting to cut back as much as possible. However, it’s actually been shown repeatedly that thoughtlessly cutting back expenses may actually hurt your final profits. As you cut services, staff and facilities, your capacity to provide goods and services to your customers becomes more limited. A limited customer base means a limited base from which to draw revenue and custom.
Make sure any cuts or restructuring isn’t going to limit your revenue generation. Look at it like trimming away dead parts from a plant -- you want to make sure you’re actually removing those parts that are not needed for your business to blossom and not causing damage to your essential links and infrastructure.
Long Transport Routes
Outsourcing has been a popular choice and it certainly has its pros and cons. On one hand, cheaper labour can help save your company money. On the other hand, outsourcing all your manufacturing to China may actually remove any savings by increasing transport times and routes. This means more money spent on transportation, greater delays in goods shipments, and greater expenses for tariffs and taxes.
While any outsourcing savings need to be carefully measured against any additional logistics costs there are other pitfalls to outsourcing that could affect your revenue. Control and ethics are regular issues which can leads to negative press and customer back lashes.
Careful assessment of any outsourcing can bring both supply chain savings and protect your businesses interests.
Inaccurate Demand Predictions
It’s tempting to look at occasional blips in supply and demand as things on which to base your future projections with regards to your supply chains. However, such factors can be misleading. Just because there’s a sudden boom in purchasing in product x now does not mean you should focus more on product x. Make sure you examine all data carefully, so as to ensure that you are only working with actual, current data.
Sometimes it takes an expert independent eye to see the real trends in your business and commissioning the help of experienced supply chain consultants can actually save you money and increase revenue.
Sudden Order Cutbacks
Order cutbacks can be unpredictable and somewhat unpreventable when they occur, sadly the results can have a huge ripple-effect greatly increase your supply chain costs. A random flux in demand may lead to anything from increased layoffs, closures of underperforming facilities or even complete rethinks in supply strategy.
Planning for potential supply chain risks means you know what action to take in these circumstances and can accommodate sudden, unexpected changes in supply and demand. The better protected your supply chain is from risk, the easier your business can adapt itself and continue to keep control of costs.
As covered earlier it can be hard as times to get a clear overview of your businesses supply chain and logistics operations and this is where an independent and experienced eye can be highly valuable.
Total Logistics supply chain consultants are well recognised for their expert and independent supply chain and logistics advice and support. If you’re looking to reduce supply chain costs investing in their help can bring real long term cost reductions that will actively improve your business.