6 Easy Ways to Cut Supply Chain Costs - That You Can Do Yourself

Summary

In this video, the speaker shares six effective ways to reduce supply chain costs, drawing on over 25 years of consulting experience. The key strategies include optimizing inventory management, reassessing transport rates, improving warehouse layout, evaluating outsourced logistics, refining distribution networks, and fine-tuning customer service offers. Practical examples are provided, highlighting the importance of making small, strategic adjustments in each area to achieve significant cost reductions. The speaker encourages viewers to explore these opportunities for better supply chain efficiency and invites questions and comments to foster further discussion.

Takeaways

• 😀 Balancing cost and service is a constant challenge in supply chain management.
• 😀 Reducing inventory costs is one of the most effective ways to lower overall supply chain expenses.
• 😀 ABC analysis helps identify fast, medium, and slow-moving inventory, optimizing stock levels.
• 😀 Eliminating obsolete and slow-moving (SLOB) stock can reduce storage costs.
• 😀 Sales and operations planning (S&OP) or integrated business planning (IBP) can significantly improve inventory management.
• 😀 Transport costs are often not just about rates, but also about the type of rate and how products are presented for delivery.
• 😀 Using the right transport rate (pallet, carton, or load rates) and ensuring efficient transport operations can lead to cost savings.
• 😀 Warehouse layout and materials handling equipment can be optimized to improve space utilization and reduce labor costs.
• 😀 Slotting in warehouses (positioning fast-moving goods closer to dispatch) can reduce labor costs by cutting down travel time.
• 😀 Review outsourced logistics and service offer structures to ensure you are getting the right service at the most cost-effective rate.

Q & A

What is the main focus of supply chain management according to the speaker?

The main focus in supply chain management is balancing cost and service. This balance is crucial to ensure efficient operations while meeting customer demands.

Why does the speaker emphasize inventory as a key area for cost reduction?

Inventory is a significant cost driver in supply chains. The speaker suggests performing ABC analysis, clearing obsolete stock, and adopting sales and operations planning (S&OP) or integrated business planning (IBP) to better manage inventory levels.

What is ABC analysis, and why is it important for inventory management?

ABC analysis is a method to categorize inventory based on demand. It helps in understanding which products are fast movers, medium movers, and slow movers. This ensures the right inventory levels are maintained to meet customer needs without overstocking.

How can companies reduce transportation costs in supply chains?

By ensuring they are using the correct rate type for transport, such as switching from a load rate to a pallet rate, or from a full truckload rate to a pallet rate, depending on the nature of the shipment. Additionally, reviewing operational profiles and improving the way freight is presented for delivery can lead to cost savings.

What is the impact of inefficient warehousing layout on supply chain costs?

An inefficient warehouse layout can lead to increased congestion, longer travel times, and higher labor costs. Optimizing the layout, such as using narrower aisles or better materials handling equipment, can significantly reduce these costs.

What is slotting in warehousing, and how can it help reduce costs?

Slotting is the process of positioning products in the warehouse based on their demand. Fast-moving products should be placed closer to dispatch areas, while slow-moving products can be stored farther away. This reduces travel time for warehouse staff, improving efficiency and lowering labor costs.

How can automation and technology contribute to cost reduction in warehousing?

Automation and technology in warehousing, such as automated sorting systems or robotic picking, can significantly reduce labor costs and improve operational efficiency. These tools help streamline processes, reduce human error, and speed up warehouse activities.

What role does outsourced logistics play in reducing supply chain costs?

Outsourcing logistics can offer cost savings if companies select the right rate structure, such as per pallet or per pick, rather than fixed monthly fees. Ensuring that the service level is appropriate for the business needs is also key to minimizing costs.

How can distribution network complexity lead to higher supply chain costs?

A more complex distribution network with many warehouses and transfers can result in inefficiencies such as excessive travel distances, unnecessary transfers between warehouses, and overlapping deliveries. Simplifying the network by reviewing customer allocations and reducing transfers can help lower costs.

Why is it important to tailor customer service offers in supply chain management?

Tailoring customer service offers ensures that customers are not over-served or under-served. For example, large retail customers might require faster delivery services, while smaller customers may be fine with less frequent deliveries. Matching the service level to the customer’s needs avoids unnecessary costs.