One of the things that supply chain teams are constantly striving to do is save cost. Here are a few ways SCM optimizes cost. Supply chain logistics costs add up and various businesses represent a major component of the overall company spend. Streamlining one’s supply chain and reducing costs will have a huge impact on your company’s bottom line.

The changing demand, supplier contracts and regulations require an organization to modify the supply chain to help you focus on your core business merits. Veritas Sourcing leverages analytical tools, market knowledge and expertise to create the right supply chain solution for your business through analysis and effective risk management strategies. There are certain key areas where one can reduce the overall freight and supply chain logistics costs.

Supply chain performance benchmarking

Freight spend reporting is the most important component to analyzing your supply chains cost and identifying potential opportunities for optimization. Use an inventory or warehouse management system to collect highly detailed data across each step of your supply chain. Pay special attention to changes in seasonal changes in both transportation pricing and performance. Throughout this process, some modes of transportation will be less costly and more reliable in certain lanes while others will be disrupted more by seasonal or weather changes.

Team members on board

Your supply chain logistics team needs to be well-versed in your supply chain strategy. To properly execute the plan, make sure processes are well documented and understood by people within your company’s logistics team. Encourage team members to assess your supply chain procedures regularly and to suggest data-based improvements for constant improvements to the overall logistics system. Over time, processes will be refined and optimized to reduce workload and cost.

Over-reliance on a single carrier or mode

Many shippers overly rely on one mode of transportation or a single carrier. Building relationships is important. However, it’s important to know that relying on one mode or one transportation provider can lead to increased cost and risk. Particularly with shippers that move mostly Less than load (LTL) Freight. They could reduce supply chain cost by utilizing Full Truckload (FTL) services on the larger shipments or consolidating LTL loads into an FTL load if the destinations are closed by. Mini shippers also have little experience with intermodal which is 10 to 20% more cost-effective on lanes longer than 5 to 800 miles. While it is true that intermodal freight will result in a longer shipment time the cost savings can add up significantly. In essence, seek to build relationships and experience with several providers and modes of transportation. The supply chain diversity will make it more stable and cost-effective.

Packaging

Consider how you package your products. Reviewing your product packaging can lead to decreases in volume and weight that will reduce freight cost as well as reduced material cost for packaging. The wasted packaging material has caught the interest of several eco-friendly companies and they’re packaging their goods in a way that safely gets them to their destination. A reduction in the number of damaged goods will also lead to a reduction and wasted expense.

Change is inevitable but as the supply chain continues to adapt and grow it will also become increasingly more complex. An optimized supply chain is no longer just a competitive advantage, rather it is a requirement to thrive in today’s fast-paced global markets. Managing the logistics part of the supply chain is a continual task that supports the demands of the business and maintains the foundation on which to fulfil customer service.