Five Cost-Reduction Strategies in Supply Chain

For e-commerce to succeed, business efficiency at all operational levels is essential. Therefore, automated supply chain management is crucial to digital businesses. In e-commerce, supply chain management focuses on acquiring raw materials, producing, and distributing the right product at the right time. Supply and demand management, inventory control, order management, distribution, and shipping to the end client are also included in supply chain management activities.

Let’s look at five potential strategies that could help you streamline your supply chain operations, cut costs, and reap other benefits.

Embrace automation

Improved IT systems and automation can help reduce costs throughout your supply chain, both in terms of data processing and operational costs.

Automation does not have to imply a significant investment in robotics, either. It can be as simple as setting up workflows to send notifications when a supplier’s risk profile changes or placing orders with suppliers.

Implement sales and operations planning tactics

Sales and operations planning (S&OP) are required for a supply chain to run efficiently. Optimal performance is dependent on proper planning, which can be costly and complicated. When you work with a third-party logistics provider, the team will eliminate waste and redundancies, assist you in better planning through data analysis and forecasting, and increase visibility so that everyone involved is up to date. If any of the following issues exist, they should be addressed during the S&OP process:

• SKU generation is uncontrolled.
• Stockouts occur frequently and uncontrollably.
• Forecasts are frequently inaccurate.
• Large amounts of slow-moving or obsolete inventory.
• Due to issues, demand and production schedules are constantly being adjusted.

Manage shipping and transportation costs

One of the most difficult and costly challenges your warehouse will face is getting products to the end user. Trying to figure out how to reduce transportation costs in the supply chain requires a long, hard look at how you’re currently sending orders.

It will be more expensive to run everything through internal departments. Consider consolidating shipments into larger orders to reduce frequency. If that is not an option, it may be prudent to outsource to specialized transportation companies.

This will reduce your operating costs. Even better, you’ll avoid the hassle and expense of hiring additional full-time employees to help keep up with demand.

Reduce touchpoints across order processing

Depending on what you sell and the model of your supply chain, your supply chain may have multiple touchpoints, potentially increasing the time it takes from a customer placing an order to receiving an item. This is true whether you sell goods in a physical store or through an e-commerce platform.

‍The more places goods travel to and the more people who handle them, the more likely something will go wrong. Goods, for example, can be lost, delayed, delivered to the incorrect location, delivered in part, or damaged in transit.

Making your order processing and fulfillment workflow as simple as possible is the best solution. This could apply to you:

Find dropshipping suppliers who can deliver e-commerce purchases directly to your customers.

Find logistics partners who can handle everything from your supplier to your warehouse or customers.‍

Automation can also help customers and procurement teams understand where products are at any given time.

Make sure to consider total costs across your supply chain network

Even the most seasoned procurement professionals and supply chain managers can become obsessed with unit costs. While unit cost is an important consideration in any successful supply chain operation, you only get the full picture by focusing on the total cost of getting goods manufactured and, ultimately, into the hands of your customers.

When calculating how much a product costs your company, you must consider the following factors:

• Logistics expenses
• Costs of warehousing
• Losses incurred as a result of damages or other causes that you are unable to recoup from your service providers

Conclusion

While your supply chain may be multifaceted and complex, the strategies you must employ to cut costs are frequently straightforward. The challenge is to ensure that all stakeholders in your supply chain understand what you expect and how you intend to change your operations.

‍You can reduce supply chain costs, boost your bottom line, and meet all of your KPIs by automating your business data and understanding where your most significant opportunities for improvement lie.

Consider Dinarys’ e-commerce development services to identify technologies to accomplish your e-commerce objectives and implement an efficient supply chain management system to make your logistics operations more profitable.