Are there hidden costs lurking in your supply chain?
It may be that you’re shipping away profit as you ship away your products.
That’s why we’re going to use this blog post to discuss how to look for
and avoid hidden costs in your supply chain. Without understanding and
controlling these costs, you won’t be able to determine the true “landed
cost” of your products.
The Council of Supply Chain Management Professionals’ Supply Chain
Quarterly lists ways you can cut costs on your supply chain:
Let Your Customers’ Requirements Mold Your Supply Chain Strategy.
It’s a question of giving them what they want, not “just what they think
they want,” writes logistics expert Rob O’Byrne.
“It’s a straightforward application of marketing principles: provide
customers with what they need and avoid adding costs for things for which
they see no value,” he says. “Although this sounds simple, real-life
examples of companies that get it back-to-front are numerous.”
One company provided all its clients with next-day delivery, even though
not every customer needed or even wanted this service, causing the company
to waste money on express transport.
Another company offered free shipping as a salve to customer complaints
and ended up losing $500,000 in revenue. Both the distributor and its
customers would have been better served, O’Byrne said, by addressing the
problems that led to the complaints.
Your Objectives Should Drive Your Strategy, Not The Other Way Around.
Once you determine your customers’ needs, you can come up with a supply
chain strategy that fits your needs and delivers on your customer service
promise.
O’Byrne suggests asking yourself if these problems have occurred to tell
if you’ve taken the right approach:
Your company doesn’t have a documented – or even generally understood –
supply chain strategy.
Your company thinks of the supply chain as something isolated to one or
two departments, rather than involving the entire enterprise.
Customers are dissatisfied with costs and services.
Many supply chain projects are handled within “silos,” i.e. within
individual departments.
“A supply chain strategy is a living thing,” O’Byrne writes. It needs to
be flexible, clear and precise.
We would also suggest a few more specific ways you can root out avoidable
costs:
Transportation and delivery costs – A supplier who can aggregate container
shipments can help you save on shipping.
Quality control – A lack of proper product testing can put roadblocks
along your supply line. By working with a manufacturer with an onsite
quality team, you lower your risk of inferior goods making their way to
your customers.
Specification drift – This concept ties into quality control. When a
manufacturer allows for substitutions in parts or materials – in other
words, drifting away from the specifications – they put the finished
product at risk.
Supply chain management is only part of what Mars International can do for
your company. By working with a global network, we ensure our clients’
products get to market in a way that’s fast, but also reliable and cost
effective.
Contact us today, and we’ll help you uncover the needless costs hiding in
your supply chain.
