Every business should always be striving towards becoming the leaner, more profitable, and less wasteful version of itself. For the professionals who are concerned with supply chain management, cost reduction is the number one concern, followed by risk management and expansion.
CPOs understand that inventory and transportation are two parts of supply chains where costs can always be brought down. With rapid technological advances and the shifting economic climates in the countries that host most of the production, inventory management, and transport can always be improved. For the CPOs who are looking for ways to cut the costs of inventory and transportation, here a couple of tips.
Inventory Control Centralization
Developing a centralized inventory can be difficult for multinational companies. However, even if they can’t benefit from the advantages of a centralized inventory, it doesn’t mean they cannot assume inventory control from one central point.
Multi-echelon planning models can’t facilitate an overall view of a whole supply chain with its multi-location interdependencies. For those reasons, multi-echelon optimization solutions are called for to facilitate better inventory management. And that’s where having a centralized inventory control get very helpful. By allowing increased stock visibility, inventory control centralization can reduce overstocking and attribute to a reduction of obsolete inventory.
Getting Rid of Obsolete Inventory
If inventory is just taking up space, with little hope that it will ever be sold at a profit, it’s putting an unnecessary burden on the inventory management process and inventory costs. And because it’s always better to prevent inventory from becoming obsolete than unloading it at a lower price just to see it show up on a secondary market, getting rid of it means preventing it from accumulating.
Control centralization can help, as we mentioned. However, improving the demand forecasting is of key importance. Tracking every product’s lifecycle can help determine demand patterns. Demand patterns will, in turn, produce a better forecast of future sales, helping the business plan their orders better.
Finding the Best Carriers
On the transport side of things, picking better carriers is among the most important cost-saving methods. The strategy to only work with a small number of carriers has its values, primarily in being able to develop better relationships, offer the carriers a larger volume of work, and get lower rates in return. The downside of this system is that, if something goes wrong with one of the carriers and the remaining ones can’t jump in to compensate, the business finds itself in a tight spot.
One of the ways to keep some flexibility while working with a couple of main carries is to join a freight exchange platform. These websites work like virtual meeting points between carriers and producers and rely on a reputation system to ensure transparency in cooperation. They can be useful when shopping for bargains, or when businesses need a carrier to quickly respond to their transportation needs.
Nearshoring and Other Strategies
“Made in China” has long been a synonym for offshoring production to countries where labor is cheap. However, with the rise of wages in China, the lower production costs are having a harder time offsetting the higher transportation costs. That’s one of the reasons why nearshoring is a growing trend. Placing production closer to home makes it significantly less expensive to transport goods.
Businesses have other choices to lower transportation costs. The practice of designing products, or at least product packaging, for efficient storage is now expanding to include designing for transportation. Investing in software solutions for better transportation monitoring and analysis is a popular choice. These solutions can help with route optimization, planning automation, and even real-time tracking.
Businesses that are not working on improving their efficiency are businesses that are falling behind their competitors. Supply chains get complicated, so it’s not always easy to determine the best areas where increased efficiency leads to reduced costs. However, managers who are not sure where to start could always look for cost-cutting opportunities in inventory and transportation. If there’s nothing there for them at the moment, they only need to wait a couple of months, and new solutions will pop up.