Ways to Cut Supply Chain Costs

Efficiency is the name of the game when it comes to running an effective and profitable business. And, when it comes down to the numbers, one of the simplest ways to cut costs is on the supply chain. 

Now, cutting costs is not the same as cutting corners, but simply analyzing the current supply chain, identifying its strengths and weaknesses, and developing sustainable and efficient processes to save money both short and long term. Of course, as with anything, finding ways to cut supply chain costs is not as simple as it seems. In most cases, this is where organizations seek professional supply chain consultants or business solutions experts to help highlight exactly where they can improve their processes. 

In this article, we have compiled a high-level overview list of the top six solutions that can help reduce operating costs and save money. Look for future articles from RTG Solutions Group that takes a deeper dive into each of the six solutions.

If your business does not have vendor management and inventory control systems in place then you could be flushing valuable money down the drain. Monitoring vendors and inventory is a key aspect of running an efficient supply chain. One of the biggest mistakes for businesses with supply chains is overproducing products and having to pay to store the excess. It may seem overwhelming to attempt a change this vast. Luckily, there are tried and true strategies, such as  Just In Time (JIT) Management, that exist to increase efficiency, decrease waste, and save money.  

Sometimes the easiest way to understand a system as complex as the supply chain is to take a step back and look at the big picture – the demand for a product that likely started your business in the first place. While many industries can be fairly volatile and hard to predict, utilizing sales forecasting can significantly improve productivity and cut costs. The easiest way to utilize sales forecasting is to communicate with customers on a regular basis and track their needs over time.

How much money do you spend monthly on storage for excess materials? Is your supply chain organized in an efficient way or is there underutilized space? On the other hand, is your building so packed with equipment or products that it has become inefficient? This is one of the easier suggestions to implement as it is completely internal. Of course, that doesn’t mean it is simple, though it is more in your control and a great place to start if you are looking to cut supply chain costs. Eliminating overhead costs associated with storage is essential to saving money. Utilizing the sales forecasting and inventory control tips above can continue saving you money on space over time.

Often times, one of the last places that organizations may look at when it comes to their overhead costs in relation to their supply chain is their internal operations. When is the last time you measured individual performance or overall efficiency in relation to your supply chain? Internal operations play a pivotal role and can significantly impact a supply chain process – especially when employees are underperforming or underutilizing resources (which can also increase costs). By taking the time to consistently measure, evaluate, and, based upon this data and information, optimize internal performance and efficiencies, it can improve processes, employee performance, improve customer satisfaction, and reduce costs.

For organizations that are heavily involved in the product development space, it’s essential to assess and evaluate not only product development but also where the materials are coming from.  What we mean is, while your material for your products may be meeting the demand – there may be an opportunity to find a vendor that can supply the material at a cheaper cost. When is the last time you performed a thorough analysis and measured the cost for your materials? Over time, vendors may slowly increase prices – or there may be new vendors in the industry that are offering better prices, and better materials. It’s imperative to consistently search for the next best material and or materials to help reduce costs and maximize profits.

In most cases, when an organization is losing money, it’s coming directly from its supply chain. However, locating the problem and fixing it is a whole different category. This is where supply chain consultants and business consulting firms, like RTG Solutions Group, can help. 

With our professional team of supply chain experts, we can help not only locate where your supply chain is costing money based on proven data, but we can also help propose the solution. 

Should you have any questions on how to improve your supply chain, or perhaps where you may be spending too much, contact us today!