How To Save Your Supply Chain Cost

$1.64 trillion was spent on logistics by the US in 2018, an increase of 11.4% from 2017 and that is equivalent to 8% of the national GDP, as reported by The Council of Supply Chain Management Professionals (PCW.com). Indeed, the supply chain and logistics cost accounts for approximately 10% of the overall business cost.

Due to the covid-19 pandemic, the container-shipping rate has increased three to four times higher than before and no signal is shown to be slowing down. Especially, after the accident of the EverGreen in the Suez Canal, the scarcity of containers and vessels has been raising more than ever (FreightWaves.com). In addition, the factory fires, as well as winter weather, have led to an ever-increasing supply chain disruption and cost (hbr.org). Not surprisingly, after Suez Canal, other transit canals like Panama plan to increase the transit reservation fee from June 1st. This has brought fears to shippers and consignees around the world about the price hikes in shipping rates and logistics costs.

In this article, there are six ways to save your supply chain cost as our best practice:

1. Utilize Space

It’s better to review the fulfillment rate in a warehouse on a timely basis to maximize the space available. If revenue decreases as the covid impact, you could think of options to lease your space to others to maintain the contract with competitive cost or find a smaller space to save cost.

2. Automation

No doubt that many SMEs (small and medium enterprises) have a limited budget to invest in well-known systems like SAP, ERP for resource planning and data processing as well as WMS (Warehouse management system). Indeed, automation is challenging for small business owners, manual and paperwork are normally seen. Therefore, the standard operation process is always important as well as getting consultants to improve the process and save cost is highly recommended.

3. Demand Planning

To order the right thing at the right time, it’s essential to observe changes in customers’ demand and follow closely sales forecast. The demand curve may change according to the season or changes in customers’ preferences including origin, local-made as well as competitor’’ activities.

4. Packaging

Packaging is also another fundamental topic to discuss as it contributes considerably to supply chain costs. Now, consumers may prefer eco-friendly packages that may be costly to business owners as they may be not durable as well as resistant well to all weather/temperature conditions. Therefore, changes in packaging should be considered carefully and reviewed on a timely basis.

5. Inventory Management

JIT (Just in time) inventory management is popular in the supply chain, which targets as low inventory as possible to lower administration cost, as well as shrinkage, occurred. However, with the supply chain disruption over the last few months, JIT is not a smart solution now, almost all business owners need to stock up for production at least three months or 6 months ahead excluding fresh or perishable foods. Otherwise, they do not have stock for customers’ demand or they have to bear high supply chain costs to get stock for sales, resulting negatively in profits.

6. Outsourcing

Outsourcing is one option business owners can consider when reviewing supply chain costs. It will depend on cost and efficiency comparison between in-house built and outsourced logistics teams, facilities, and infrastructure. Understanding business needs, outsourcing is able to help business owners to save substantial costs.

By working with quality and experienced partners on door-to-door services, Warehouse Transport Group is pleased to provide innovative supply chain solutions for producers’ sustainable growth and cost-saving. We have a diverse group of vendors from the West coast to the East coast as well as international destinations in the US, Latin America, Europe, and Asia. We handle your stuff like ours and make sure products arrive in the right place at right time, in good quality with a professional working manner.

We are here to help! Let’s set up a no-commitment supply chain call and talk through some new ideas you could benefit from.