What You Can Do This Month To Reduce Supply Chain Costs

Mnet 54131 Warehouse Photo Ap
Aleksejs VolcenkovsAleksejs Volcenkovs

It is a fair estimation to say that your supply chain and logistics activities take up 50 percent to 70 percent of your costs so reducing costs even by a small amount can easily make a huge difference in your expenses.

Many organizations and managers focus on the long-range goals which of course are important but certainly aren’t the end all. Waiting for the results of the long-range cost-cutting activities to come to fruition does not really help you right now but there are things you can do that will improve your costs right now.

Increase Your Profits Without Increasing Your Sales

Ideally sales would increase so that profits go up but the reality is typically not that simple. You can increase your profits by cost-reduction tactics. Making simple changes can really pay off. Start by looking at efficiency. How fast are the goods moving out of the warehouse? What steps can be taken today to improve how goods are moved?

Is everyone working in an efficient environment? Are items easily retrievable?

If you suspect that you are dealing with outdated forecasts and customer demand analysis than that is absolutely something you can deal with this month that can change things greatly when it comes to the costs.

Move It Faster

Whatever products/inventory you are working with you should be taking every step possible to move it as quickly as possible out of the warehouse. The longer products/inventory hang around the warehouse the more risk there is that they will become damaged.

Reducing risk and moving the products/inventory quickly also means that you should be reviewing other strategies that you can implement right now that will keep those supply chain bottle necks down to a minimum as well.

Successful low-cost supply chains historically take a minimalist approach. Less is always more when you are talking about a supply chain. The less people involved, the better. The less the goods are hanging around the warehouse, the better.

Labor Costs

Labor is way up there when it comes to supply chain costs. It is something that is unavoidable and not something that is really negotiable. You have to have dependable laborers and you have to pay them but you can work on getting more work out of each hour which can offset the pain of the cost a bit. 

Making sure that your labor force is working at the maximum level of efficiency can mean simply supplying them with the most efficient tools like the right packaging. Here is a simple example:

Let’s say that you are using crates, which are a common packaging tool. Crates are a great way to protect your inventory but they are difficult to maneuver. They are difficult to put together and they are difficult for a single worker to manage.

Pallets with pallet collars are simple to use. They can be constructed by one person and maneuvered by one person and a pallet jack. By making this simple switch you have cut your labor costs in half. Instead of having to pay two people to handle one crate you can pay one person to handle one pallet collar set up and the pallet.

Watch the Fines

Do an audit of your inventory shipping fines and see where you are losing the most money on carrier bills. You can actually identify quite a bit of waste by auditing your carrier bills.

This typically happens with mid-sized businesses that can afford to write the fines off as the cost of doing business but it is wasteful and can be eliminated to quickly filter those funds back into the supply chain.

Take Advantage of Trade Agreements

Companies that take advantage of international trade agreements can easily save money on taxes and duty costs.

An alarmingly high rate of businesses do not take advantage of the trade agreements that are in place that can easily reduce their overall costs.  It is another simple way to immediately reduce the costs of your supply chain.

Use Software for Filing Purposes

You can cut down on office staff and not have to rely on other members in the supply chain by connecting with brokers at the boarders electronically using software that is available.

Filings and other functions can be completely automated if you have the right tools.

Managing Inventory

Inventory is your biggest asset but if it is not managed correctly it will literally siphon money right out of your operating accounts. There are a few things that apply under managing your inventory more efficiently starting this month:

  1. Ship more items in bulk
  2. Reduce misallocations
  3. Devise a postponement strategy
  4. Use visibility software

You can reduce costs by shipping more of your inventory in bulk. Of course this is another area where the right packaging tools can really come in handy.

You can use three pallets that are fitted with pallet collars that are only stacked high enough to compensate of the goods. That means you do not have to use three separate crates that are only full half way and that you have to pay to ship as if they were full.

Devise a program that will reduce misallocations and a postponement strategy. Devising these two plans can help to your forecast more accurately,

Visibility software is an important part of reducing overall costs in the supply chain. While inventory is your greatest asset, it does not do your company any good to have too much of one item sitting in the warehouse.

What you do this month can change how much you are paying out. You cannot really control whether sales are going to increase/decrease or stay the same but you can control your ability to respond to the ever fluctuating market. You can be prepared. You can provide your labor force with the tools that they need to quickly respond.

About The Author: Aleksejs Volcenkovs is the Chief Marketing Officer (CMO) of Kronus — a pallet and pallet collar manufacturer — with have considerable knowledge and experience around pallets, and the various roles they play in manufacturing and warehouse operations.

(Cover image: AP Photo)

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