How to Reduce Cost in Your Supply Chain?

Summary

In this video, Rob O'Byrne from Logistics Bureau shares expert tips for reducing supply chain costs, drawing from his experience with over 1,400 projects globally. Key strategies include conducting a cost-to-serve analysis to understand and optimize costs, tailoring customer service offers, implementing sales and operations planning for accurate demand forecasting, and critically evaluating warehouse efficiency and transportation services. For further insights, viewers are directed to the Logistics Bureau blog and a full-day coaching event in Sydney.

Takeaways

• 📈 Understand Your Supply Chain Costs: The first step in reducing costs is to know and understand them in detail through a cost to serve analysis.
• 🔍 Cost to Serve Analysis: This involves understanding the cost associated with delivering different product types to various customer types.
• 📦 Order Size and Customer Service Offer: Adjusting these can have a direct impact on cost to serve, and a one-size-fits-all approach is usually not effective.
• 🛒 Sales and Operations Planning (S&OP): Implementing S&OP can help forecast demand accurately and balance supply to ensure efficient service.
• 🏭 Warehouse Efficiency: Assess the flow through the warehouse and consider implementing slotting to improve efficiency.
• 🚚 Transport Cost Analysis: Evaluate the services being purchased for transport to ensure they are the most cost-effective for the business's needs.
• 🚛 Avoid Unnecessary Premium Services: Sometimes, cheaper transport options may suffice, such as next-day delivery instead of same-day or expedited services.
• 🌐 Global Experience: The advice is based on extensive experience with approximately 1,400 projects worldwide.
• 📚 Access More Information: Additional resources and guidance can be found on the Logistics Bureau blog.
• 🗓️ Upcoming Coaching Program: On October 26th, there's a full-day coaching program in Sydney featuring industry experts, which is a charity event.
• 🎟️ Limited Seats Available: As of the recording, there were only 21 tickets left for the coaching program, indicating its popularity and the need for quick action.

Q & A

What is the main focus of the video script provided?

The main focus of the video script is to provide tips and insights on how to save costs in supply chain management.

Who is the speaker in the video script?

The speaker in the video script is Rob O'Byrne from Logistics Bureau.

What is the significance of knowing your supply chain costs?

Knowing your supply chain costs is crucial as it helps identify areas where costs can be reduced and provides a foundation for a cost-to-serve analysis.

What is a cost-to-serve analysis and why is it important?

A cost-to-serve analysis is a process to understand the cost of delivering different product types to different customer types. It is important because it reveals opportunities to reduce costs and improve efficiency in the supply chain.

What are some factors that affect the cost to serve in the supply chain?

Factors that affect the cost to serve include order size, frequency, warehousing costs, and the method of delivery such as individual orders versus bulk orders.

Why is it suggested that a blanket customer service offer may not be suitable for all customers?

A blanket customer service offer may not be suitable for all customers because different customers have different needs and expectations. Tailoring the service offer to the customer's specific requirements can help reduce costs and improve satisfaction.

What is the role of sales and operations planning in supply chain cost reduction?

Sales and operations planning is a process that helps forecast demand accurately, balance supply, and ensure efficient service delivery, which can lead to cost reduction in the supply chain.

How can warehouse efficiency impact supply chain costs?

Warehouse efficiency impacts supply chain costs by affecting storage and picking methods, as well as the flow of products through the warehouse. Inefficient processes can lead to higher costs.

What is the common mistake people make when trying to reduce transport costs?

A common mistake is trying to negotiate lower unit costs with transport companies. Instead, the focus should be on assessing whether the service level purchased is appropriate for the needs, as sometimes cheaper services may be sufficient.

What is the event mentioned by Rob O'Byrne for further learning on supply chain cost reduction?

The event mentioned is a full-day coaching program in Sydney on the 26th of October, which includes small-group coaching sessions with industry experts on various topics related to supply chain management.

How can viewers access more information on the topics discussed in the video script?

Viewers can access more information by visiting the Logistics Bureau blog at logisticsbureau.com, where they can find articles, videos, and guides on various aspects of supply chain management.

Outlines

00:00

📈 Supply Chain Cost Reduction Strategies

Rob O'Byrne from Logistics Bureau introduces his video by highlighting the importance of cost reduction in supply chain management. He shares his experience from 20 years and over 1,400 projects, emphasizing the need to understand supply chain costs through a cost-to-serve analysis. He explains that different product and customer types incur different costs, and understanding these costs can reveal opportunities for savings. Rob suggests examining order size and customer service offers, as a one-size-fits-all approach is rarely effective. He also touches on the importance of sales and operations planning for accurate demand forecasting and efficient service. Lastly, he advises reviewing warehouse operations, including slotting and storage/picking methods, and critically evaluating transportation services to avoid overpaying for unnecessary expedited shipping.

05:00

🚚 Practical Tips for Supply Chain Cost Optimization

In the second paragraph, Rob continues his discussion on reducing supply chain costs by focusing on transportation services. He questions common practices such as overnight shipping and same-day courier services, suggesting that these may not always be necessary and could be more cost-effective if replaced with slower alternatives. He provides a brief overview of additional areas to consider for cost reduction, including sales and operations planning (S&OP), network optimization, warehousing efficiency, and transport strategy. Rob invites viewers to visit the Logistics Bureau blog for more in-depth information and announces a full-day coaching program in Sydney on October 26th, where experts will share knowledge on various supply chain topics. The event is a charity initiative, with all ticket proceeds going to a good cause. He also mentions an Eventbrite app to track ticket availability, indicating that there are limited spots remaining for those interested in attending.

Keywords

💡Supply Chain

Supply chain refers to the network of activities involved in the production and delivery of a product or service, from raw materials to the end consumer. In the video's context, the supply chain is the focus for cost reduction strategies. The script discusses various methods to analyze and optimize supply chain operations to save costs, emphasizing the importance of understanding the entire process from production to delivery.

💡Cost Reduction

Cost reduction involves strategies and actions taken to decrease expenses within an organization. The video's theme revolves around cost reduction in the supply chain. The speaker provides pointers on identifying and minimizing costs, such as through order size optimization and efficient warehouse management, directly linking cost reduction to improved supply chain performance.

💡Cost to Serve Analysis

A cost to serve analysis is a detailed examination of the costs associated with delivering products or services to different customer segments. The script introduces this concept as a fundamental step in understanding supply chain costs. It is used to identify cost drivers and opportunities for cost savings, such as differentiating costs based on product type and customer requirements.

💡Order Size

Order size refers to the quantity of goods ordered in a single transaction. The video script mentions order size as a factor that impacts cost to serve. Larger orders, such as those sent in bulk to retailers, can reduce per-unit costs due to economies of scale, whereas smaller orders may incur higher costs due to additional handling and shipping.

💡Customer Service Offer

The customer service offer encompasses the promises a company makes regarding the level of service provided to customers. In the video, it is argued that a one-size-fits-all approach to customer service is often inefficient and can drive up costs. Tailoring service offers to different customer segments can help reduce costs while maintaining customer satisfaction.

💡Sales and Operations Planning (S&OP)

Sales and Operations Planning is a cross-functional process that aligns sales forecasts with production and supply capabilities. The script highlights S&OP as a key strategy for cost reduction by enabling accurate demand forecasting, efficient supply management, and optimal service delivery, thus preventing overproduction or stockouts.

💡Warehouse Efficiency

Warehouse efficiency refers to the effectiveness and productivity of warehouse operations. The video script suggests examining the flow of products through the warehouse and considering practices like slotting to improve efficiency. Efficient warehouse management can reduce costs by minimizing handling time and optimizing storage space.

💡Slotting

Slotting is the process of organizing and positioning inventory within a warehouse to optimize picking efficiency and reduce picking time. The script mentions slotting as a potential area for improvement in warehouse operations, suggesting that proper slotting can lead to cost savings by streamlining the order fulfillment process.

💡Transport

Transport involves the movement of goods from one location to another, typically via various modes such as truck, rail, or air. The video discusses the importance of evaluating transport services to ensure that the right level of service is being purchased to avoid unnecessary costs. For example, choosing a two-day delivery service instead of an overnight service can reduce costs without significantly impacting customer satisfaction.

💡Full Day Coaching Program

A full day coaching program is an intensive, focused educational event designed to provide in-depth knowledge and skills in a particular area. In the script, the speaker invites viewers to a coaching program in Sydney, which includes expert-led discussions and small-group coaching sessions on various supply chain topics, offering a practical opportunity to learn more about cost reduction strategies.

💡Eventbrite

Eventbrite is an online platform used for event planning, ticketing, and promotion. The script mentions an Eventbrite app that the speaker uses to track ticket sales for the coaching program, illustrating the use of technology for event management and providing a real-time update on the availability of the program.

Highlights

The importance of cost-saving in supply chain management.

Introduction by Rob O'Byrne from Logistics Bureau.

The setting of the video in Parramatta Park for a fresh perspective.

Three to four cost-saving pointers based on 20 years of experience.

Understanding the necessity of knowing your supply chain costs.

The concept of a cost to serve analysis for detailed cost understanding.

The impact of order size and customer service offers on cost efficiency.

The uniqueness of customer service offers for different customer types.

The role of sales and operations planning in cost reduction.

Importance of accurate demand forecasting in supply chain management.

Evaluating the efficiency of warehouse operations and flow.

The practice of slotting in warehouses for improved efficiency.

The common mistake of underestimating the cost of transport services.

The strategy of matching transport services to actual needs rather than opting for the fastest.

A quick summary of supply chain cost reduction strategies.

Invitation to the Logistics Bureau blog for more detailed information.

Upcoming full-day coaching program in Sydney on October 26th.

Details of the charity event and the involvement of industry experts.

Interactive format of the coaching program with small-group coaching tables.

The opportunity for attendees to choose topics of interest for discussion.

Information on how to book tickets for the Sydney coaching event.

Transcripts

Now, if you're working in supply chain

management, one of the things that you're

constantly striving to do is to save

cost. So let me give you three or four

pointers that I found over the last 20

years or so that in most businesses will

help you save costs in your supply chain.

Hi, this is Rob O'Byrne from Logistics

Bureau and I thought we'd get out of

the studio today and actually get out

into Parramatta Park and get a bit of fresh

air.

I came out here, it's seven in the

morning, I thought it'd be nice and quiet

but there's all kinds of really cool things

happening in the park. We got all the cyclists

out and lots of runners and we've even

got a group of people doing Tai Chi, let me

just swing around here, so you can see them

behind me, so what we'll do is we're

going to find a quiet spot and I'll give

you those tips on saving costs in your

supply chain.

Okay, so we've found somewhere a little bit

quieter. This is a cute little cottage

right middle of Parramatta Park, if you

live in Sydney, you really ought to get

out and have a look at Parramatta Park,

it's a really cool place. Okay, so reducing

costs in your supply chain.

Let me give you three or four key areas

where you can reduce supply chain costs,

and this is based on working on about

1,400 projects all around the world

helping people reduce costs. So, number

one, you need to know your costs in the

supply chain. That might sound like a

really dumb question, but the first thing

you need to do is to establish those

costs and really understand them in

detail, and the best way to do that is a

cost to serve analysis. If you've never

done a cost to serve analysis, it's not

that hard to do, and in fact if you jump on, I'll

give you a link to some some blog posts

later, which tell you exactly how to do it.

You basically need to understand what

is the cost for your business in

delivering each of your different

product types to each of your different

customer types, now it's really important.

So imagine, what have I got in my pocket? Imagine

we're selling mobile phones, if we're

selling these to individuals all over

the country and we're sending them out,

you know, in Korea overnight or

whatever, that has

certain cost. If we're selling them to

retailers in boxes of ten, that's going

to be a cheaper cost, because we're still

processing just one order. It's going to

be a lot less warehousing cost because we're

just picking up a case of 10 and we're

sending that out. If we're going to be

sending them out, you know, by the

hundreds, so our ncost per unit is a lot

less. Phones are probably not a great

example because people buy them

generally individually, but you get the

idea.

You need to understand the cost to serve

all the way through your supply chain.

That will throw up all kinds of

opportunities, it's going to peel back the

onion for you, so you can see really

where you can reduce those costs. And

what are some of the things that are

going to help you reduce costs? Let me

give you a couple of those, because when

you when you find those high cost areas,

you want to try and reduce them. One is going

to be order size and related to that is

customer service offer. If you've got a

blanket customer service offer for all

your customers, I'm going to say it's wrong.

If you want to disprove me comment below,

but it's probably wrong

I've never seen a business where one

customer service offer fits every single

customer.

Having said that, I mean pizza delivery or

something, I don't know, but it's very, very

rare, so you need to understand your

service offer and how that

drives cost and the key thing there is

order size and frequency because that

has an immediate impact on your cost to

serve, so establish cost to serve, look

at customer service policy. Next one, if

you're not doing sales and operations

planning, you probably should be. Again,

very few businesses don't benefit from

that and if you're not sure what sales

and operations planning is, it's

basically a planning process that goes

right across all the key functions in

the business to enable you to

forecast your demand accurately, look at your

supply and kind of load balance all

of that and make sure that you're

offering the best service in the most

efficient way. So cost to serve,

understand order profiles, sales and

operations planning, we're probably then

getting down into the nitty-gritty of

actually how you're moving product. Your

warehouse can be very inefficient, so

have a look at the flow through the

warehouse,

and maybe you haven't done slotting in

the warehouse, if you don't know what

that is,

I've got some articles on the blog, and

look at the different storage and

picking media that you're using, and then

in terms of transport,

that's probably another key one, and what

people try to do is they go and beat up

their transport companies to try and get

a lower unit cost for their transport.

That often doesn't really give you any

benefit, because transport isn't a high

margin business anyway and it's very

competitive. Where people are generally

paying too much for transport,

it's because they're buying the wrong

service, so just think about that for a

minute. Are you sending things overnight

when actually you know two day service

would do?

Are you sending it out you know to be

delivered within a couple of hours by

courier when next day would do? And so those

are the sorts of things to look at in

transport, what service are you actually

buying. Okay, so there's some quick tips on

how to reduce costs in your supply. I'm just

gonna raise my voice a bit because we've

got the peloton going past, it's a very popular

cycling area here, so there's some tips

on how to reduce costs in your supply

chain, understand the costs through cost to

serve, and then start getting into things

like S&OP, and looking at

network, and warehousing, and transport,

and so on.

Now that was just a very quick summary,

if you want more information on this,

I've got loads of it for you, just go on to our

blog, you may be watching this on the

blog, but if not, go to logisticsbureau.com,

and on the homepage there, there's a button on

the top right which says blog, go in

there and it's all sort of categorised as

articles, and videos, and guides, and all

sorts of things. Years and years worth of

material there and I'm sure you'll find

what you want. If you happen to be

watching this and you live and work in

Sydney, then there's an even better way

that I can give you more information,

because on the 26th of

October, I'm actually running a full day

coaching program in Sydney 26th of October in

Sydney, it's $87 for the

day, it's a charity event so the

$87 dollars will go to charity.

It's fully-catered and what I've done is I

brought in 20 experts from all areas of

industry

to help share their knowledge with the

people who are coming along for the day.

And it's not kind of sit there and death by

powerpoint, not at all, it's all

small-group coaching tables, different

topics, different tables, you pick what

you want to know more about, if it's

warehousing or sales and operations

planning, I've got a fantastic guy on

sales and operations planning coming

along.

You just move around through the day and

they'll be little many presentations and

discussions, and it'll been awesome day, so

come along to that if you're in Sydney

on the 26th of October.

I'm just going to have a quick look at my

phone because I've got this fantastic

little app from Eventbrite that tells me how

the booking's going, and we've got 21

tickets left, so I'll make sure there's a

link if you want to come along to that,

and a link to the blog. So, saving costs

in your supply chain, a few pointers, lots

of information on the blog, come along to

a full day coaching if you want to learn

more.

I hope that was helpful.