The supply chain is an essential part of a business. It is what keeps products moving and it helps keep the lights on for a business.
Part of that process is having steady supply chain management. Considering that this industry is worth over $27 billion, it should tell you how much businesses rely on it.
With that said, supply chains are not free. Some businesses may not have the money to keep up with all of the supply chain costs.
If you are in this situation, you may be wondering how to go about supply chain cost reduction. How can you do this in a way that will not impact your bottom line?
This is your guide.
Maximizing Your Space
The first thing that you can do to reduce your supply chain costs is to maximize your space. This can be done in a few different ways.
Let’s say that you are having trouble fitting all of your product in one warehouse. However, you take a look at this warehouse and realize if you stock items in the opposite direction, you end up having more space than you need.
That is an example of making the most out of your space. But it does not just come down to what direction you place products. It is also about organizing products.
You need to find an organized way of stocking products. This can be anything from alphabetical order, number order, stacking by size, first in first out, and more. The point is that for whatever system you go with, you want to have an easy time locating an item.
Then, there is increasing space for operational purposes. This can include creating lanes and aisles in a warehouse so people can move through it smoothly. That can help a factory save hours when it comes to production and help get items out quicker.
Automation
Another thing that you should consider doing is automating certain parts of the supply chain. This can help you increase productivity and increase organization.
An example can be having a file that keeps track of every product in your system. Automating this step can let a manufacturer know where a product is at all times. That way, if something goes wrong with that product, they can easily retrieve it.
On top of this, factories can even use machines to speed up the production process of certain items. An example can be having parts of a product go through an assembly line and just having humans there for quality control.
Believe it or not, about 64% of manufacturing activities can be automated. This means that if you have no automation in your supply chain already, you can put nearly two-thirds of your manufacturing process through this system. That is more than likely to increase production rates and decrease supply chain costs.
Selling in Bulk
When it comes to manufacturing products, it is almost always more efficient to do so in bulk. The reason is that under this system, you can ship out a large amount of items at one time.
A drawback can be that this could potentially overwhelm the manufacturing process. However, if it is done the right way, it can definitely reduce supply chain costs.
One reason for this is that if a bulk order gets placed, you can ship out the same amount of products at one time as it may take for you to do so in weeks.
Think about it. This means that you do not have to pay those employees for weeks of man hours by getting rid of it at one time. It also means that you do not have to pay for extra shipments for all of these items.
At first, this may mean accepting a lower price per item but you have to think long term when it comes to this. It could also mean unloading an item that is not selling as fast as you expected. Or, it could mean unloading items enough where you will make more money on the overall payment.
Finding Shipping Partners
Finally, one part of shipping where costs can add up is if you do not need all of the space that is offered. This is especially the case if your business is one that relies on fast deliveries constantly.
In this situation, your business can end up overpaying for only needing half of the space available.
What can you do here? You need to find a partner to go in on the shipments with you. This can be either a similar company or a company that has similar shipping routes.
What this will do for a shipping company is that it allows them to fill up all of their space on one shipment. As a result, they can make more money on one shipment.
So, what does it do for you? You can offer to split the cost of a shipment with the other company. In exchange, the shipper gives your company a bulk deal because you are going to use all of the space at one time.
Reduce Your Supply Chain Costs
These are just some ways that you can reduce your supply chain costs. You want to start out by getting your warehouse more organized and automating as many parts of the manufacturing process as possible.
After that, see if you can start selling more of your orders in bulk. Then, flip this to the other side and try to send more shipments out in bulk.
Do you want to know how to improve your supply chain? Message us here with your questions.
