Supply chain cost optimization has always been a challenge for organizations – even before the Covid-19 pandemic placed an unimaginable strain on the global supply chain. As Gartner states, organizations typically prioritize a supply chain cost management model that’s short-term and functionally focused over long-term business value. A fact that prohibits them from pursuing big change and meeting full performance potential. 

In the face of pandemics, economic uncertainty, and an increasingly unpredictable supply chain, however, there’s an urgent need to better manage supply chain costs. In fact, when Anvyl surveyed 400+ small and mid-sized businesses (SMBs) for our SMB Supply Chain Outlook 2023, we found that 31% report losing between 7% and 15% of revenue due to delays in 2022, and an additional 29% report losses of 15% or greater.

These statistics shine a spotlight on just how important it is for industry professionals to develop an efficient supply chain management strategy that maintains service levels while carefully controlling end-to-end supply chain costs. 

In this article, we highlight five ways to optimize supply chain costs. 

How To Reduce Supply Chain Costs

Poorly managed logistics and distribution centers can hide or underestimate a substantial portion of their supply chain costs. However, many tools and cost optimization strategies are available that enable organizations to determine what is going on, so they can increase supply chain cost optimization. 

Anvyl has identified the scenarios in which cost-conscious supply chain decisions make sense. Highly-effective supply chain teams can bring excellence to their brands by utilizing these top 5 ways to reduce supply chain costs:

1) Put the Right Tools in Place

Don’t make trade-offs by trying to reduce costs in cost management strategies. The most effective way to manage the supply chain cost factor is to use the right tools for the job. Look for software systems like Anvyl that can centralize data, automate processes, and facilitate collaboration across your entire supply chain to get better visibility in a fraction of the time. 

2) Track and Analyze Cost-Related Metrics

To optimize your supply chain costs, you will need to rely on metrics that can help measure and evaluate historical, present, and future performance scenarios. Advanced supply chain metrics you may want to track include:

• On-time delivery rate: This metric impacts both costs and customer satisfaction. For ecommerce businesses in particular, the stark reality is that many consumers will hesitate to buy from your brand again if you can’t fulfill an order on time. Late delivery can be attributed to a number of reasons, but watching this key metric can help you identify potential bottlenecks in your delivery system, so you can best optimize the delivery process.
• Speed to fulfillment: This metric tracks the time from when an order is placed to when it is delivered. If this metric increases, that could indicate a serious disruption in your fulfillment process.
• Cost of shipping: In today’s volatile transportation market, especially, it is critically important to track shipping costs, so you can be aware of when they are increasing, and take appropriate actions to reduce costs or increase prices, if necessary.

3) Monitor Customer Demands to Identify Trends

According to Michigan State University, “Demand planning is a supply chain management process of forecasting, or predicting, the demand for products to ensure they can be delivered and satisfy customers.” The objective is to have enough inventory to meet demand without carrying surplus inventory. 

Various factors can influence demand, such as inflationary pressures, labor force changes, severe weather patterns, natural disasters, and global events. A company that doesn’t monitor these events will have no idea how they can impact its cost management strategy.

To monitor demands and spot trends most effectively, use quality analytics software that will automatically gather customer demand in real time. Then, determine a regular schedule for monitoring trends (weekly, monthly, quarterly, etc.), which may vary somewhat based on your industry. Maintain your monitoring schedule and track demand fluctuations to see how they change over time, which can help inform future business decisions.

4) Take Advantage of Automation

Supply chain automation uses advanced technology solutions to perform or streamline supply chain processes with minimal human effort or involvement. Supply chain automation enables a company to reduce the manual work required to perform specific functions, thereby speeding up workflows and making the supply chain more efficient.

The main supply chain areas you can automate include:

• Back-office: Use sophisticated software wherever possible to monitor purchase orders, automate your financing and accounting tasks, process invoices, and keep track of performance metrics.
• Transportation: Use route-optimization software to find the best routes, determine the most suitable carrier, and track shipments in real-time.
• Warehouse: Automate as many of the fulfillment and warehousing processes as possible, including order processing, pick-and-pack, tracking, and inventory control.

5) Streamline Your Ordering Processes

Streamlining the ordering processes is the ultimate form of internal sustainability. Knowing precisely which products are needed, what supplier has them at the most cost-efficient price, and transporting them at the lowest cost possible to the precise destination are all factors in the total cost of ownership. Real-time supply chain visibility relies on sourcing knowledge, production management, and logistics visibility.

To increase supply chain performance, work with reliable suppliers that have a proven track record. Create a supply chain strategy that includes constant monitoring and maintaining of supplier relationships. Rely on your demand planning to help update suppliers of potential changes in your ordering patterns. Share data across all involved entities to help in the decision-making process.

Cut Your Supply Chain Costs With Anvyl

Cost optimization requires efficient management tools and responsive warehouse management software that contains features designed to improve productivity and profitability. 

Anvyl is a warehouse inventory management software that allows supply chain leaders to centralize their data, automate processes, and facilitate collaboration. We help companies manage their supply chains better. Schedule a demo or learn more about how Anvyl can help your company cut supply chain costs.