Controlling cost is a number one priority for companies that manufacture parts and source material from domestic and overseas regions. Logistics management is a key factor that should always be monitored in order to keep spend low while maintaining quality standards.
Logistics management covers the breadth of activities ranging from the procurement process, transporting materials, and storage of goods.
Here are a few strategies to think about as you trim your logistics budget.
1. Leverage ERP distribution software.
Supply chain management can be a many-headed beast; one you shouldn’t square off with unless you have the right weapon. From overseeing the movement of goods to delivery dates, configuring routes and transportation modes to accommodate varied products and sources based on supplier location, fulfillment centers, distribution centers and stores – managing a single-or multi-source supply chain is no easy feat.
It’s best to arm yourself with an Enterprise Resource Planning (ERP) distribution software to help fully shield you against all opportunities for error. A quality ERP tool will help streamline the entire procure-to-pay process with data-driven graphing and continuity checks to help defend against user error that’s all too common.
2. Optimize inventory storage space.
You may not have a huge warehouse with which to store all your inventoried materials, but you can increase overall storage density in bins and racks by improving the vertical capacity of the space available. If the full vertical height of your storage area is not being used it is wise to invest in a system that can ensure no space goes to waste.
3. Know the true cost of sourcing materials.
Fuel costs are an unavoidable and uncontrollable factor to any bottom line. This can affect the entire supply chain at every level. Calculate your freight, brokerage and inventory, which all carry costs to support lengthy supply chains.
If you are supplying from overseas because the initial selling point is cheaper than the domestic one, you may want to consider the cost of the shipping or flying. Sourcing material from the other side of the country may be a better idea than ordering materials from China.
4. Eliminate all waste.
Find any and all things cluttering up your supply chain and draining your bottom line. Distribution software is a huge help with this. Find out where you’re unnecessarily spending and focus on having the optimal amount of supplies in your inventory.
5. Consolidate suppliers
You will likely have multiple sources for various materials; it’s the nature of the beast. But consolidating your efforts and keeping them in clusters can reduce shipping costs since you won’t be sourcing from all over the globe. If at all possible, try and arrange for full container loads (FCL) since they are much more cost effective.
6. Run a spend analysis.
This may seem rather obvious, but many companies are blissfully unaware of their total spend and what their business choices are really costing them. An Ariba case study on JM Family Enterprises, Inc. found that they had high levels of extraneous spend and with the right solutions were able to reduce admin workload and save millions by automating sourcing and contract management, among other improvements.
7. Create a contingency plan.
Making sure that you have backup suppliers in case one falls through and you need last minute material is paramount to the total spend. It is also a good idea to ensure that the freight provider with whom you are engaged with has the responsiveness and qualified capacity to send you inventory in any urgent last minute requests.
You’ll want to make sure you have absolute confidence that they can help you with any order at any time; or that you have a dense enough network of backups in the undesirable situation that the main supplier cannot help.
No supply chain is completely sturdy or invincible to market changes; there are too many moving pieces to make that a possibility. But, if you stick to these strategies and tips, you should be able to weather the storms.
This article has been edited and condensed.
Pramod Gupta is sharing supply chain management tips on behalf of Heightx Technologies and has over 8 years’ experience in freelance writing industry, having worked with multinationals in a variety of senior roles. He has led the company through innovating product and service change, keeping innovation at the forefront of emerging internet technologies. Connect with @HeightxTech on Twitter.
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