5 Simple Ways to Reduce Your Supply Chain Costs


If you’re currently facing steep supply chain costs as the result of global shortages, inflation, and other unwanted factors, it’s important that you come up with a specific game plan that allows you to reduce your costs and regain the upper hand in the battle against your balance sheet.

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The Cost of Supply Chain Inflation

Inflation rates have surged to their highest point in 30 years, and it’s having a significant impact on most companies – so much so that many are having to pass on rising costs to consumers to keep their balance sheets intact.

As Supply Chain Dive reports, “Nearly 90% of companies said they face extraordinary cost increases because of supply constraints, with more than 60% expecting the trend to persist at least into the fourth quarter of [2023], according to the survey last month of 1,104 CFOs across 14 sectors.”

The data shows that 7 out of 10 companies are struggling to adjust to supply constraints and are dealing with negative consequences like rising costs and delayed production and shipping.

For a while, businesses were able to adjust things internally and cut costs. But as things stand today, there’s no “pressure relief valve” for building costs. This means costs have to get passed on to customers, which in turn impacts factors like branding, customer experience, sales, and loyalty.

5 Ways to Lower Your Supply Chain Costs

Supply chain issues and inflation are precarious issues, to say the least. And while businesses can’t do much about the larger supply chain issues, there may be some small ways they can respond to keep things in check. Here are several ideas:

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1. Stay On Top of Your Inventory

Inventory loss is actually one of the most significant contributing factors to high supply chain management costs. While everyone wants to focus on inflation right now (and rightfully so), the reality is that you can’t do anything about it. You can, however, address inventory loss. In doing so, you might even be able to offset the effects of inflation.

The key is to be hyper-aware of inventory at all times. You need to carefully monitor and track every single SKU, unit, and pallet in order to know how much you have, how long you’ve had it, and where it’s going.

Blind spots in inventory management are one of the most dangerous and costly aspects of managing your supply chain. It leads to overordering, underordering, waste, and many other unwanted issues. 

2. Embrace Automation & Tech

If you’re currently relying on spreadsheets and outdated software, it’s time to improve your supply chain with the latest automation. This includes cloud solutions, connected applications, and systems that automate the menial tasks that typically require lots of manhours.

You’ll have to find the right solutions for you, but you want something that’s able to create standardized and reusable processes to automate tasks across all departments. This can eliminate much of the back-and-forth that happens when there isn’t enough insight. (Potentially saving thousands of emails and customer/supplier requests per month.)

Companies like Flat World Global Solutions make managing the logistics portion of your supply chain a breeze. These programs can be customized to fit any existing operating system and provide you with a view of everything, from shipping progress to inventory levels, all in a single dashboard. This saves labor, speeds up timelines, and ultimately helps companies become more efficient.

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3. Improve Warehousing and Storage

You can lower costs in the long run by investing more into storage optimization right now. You can also emphasize better operations. This might look like optimizing space, reducing damage, and minimizing the amount of packaging and materials you use for shipping.

You can also get more creative by trying a new warehousing approach.

“A solution to optimize space is by having multi-client facilities,” industry insider Emily Cook says. “This allows for costs to be shared across multiple companies and you only pay for the area that you use. This also means you won’t need to hire your own employees.”

This is obviously a big decision to be made, but you have to turn over every stone in order to identify the best path for slashing costs and improving supply chain efficiency in a market like ours. 

4. Track, Analyze, Iterate

You can’t just implement a system and hope it works. Supply chain management, like every aspect of running a company, requires constant improvisation and tweaking. That’s why having a streamlined dashboard where all of your data lives is so important. It allows you to:

  • Track the right data and follow specific key performance indicators (KPIs)
  • Analyze what the data says in real-time so that you know what’s working
  • Iterate based on this intel and continue to improve (reducing costs and inefficiencies along the way)

This three-prong approach of tracking, analyzing, and iterating is the key to successfully keeping supply chain costs down, regardless of the larger economic climate (inflationary or deflationary).

Source: ecomcrew.com

5. Over-Communicate

The final suggestion is to over-communicate everything. It doesn’t matter who you’re working with or what the circumstances are; over-communicating prevents small issues from becoming major problems that threaten your supply chain and/or profitability.

Over-communicate with suppliers when you suspect there’s an issue. Over-communicate with customers when supply chain problems are slowing down shipping times. Over-communicate with employees to keep them engaged.

If your communication is lacking, all of these underlying issues and problems will be exacerbated. By opening up and having transparent dialogue, good things will happen.

Keep Your Costs in Check

It’s difficult to keep costs totally in check when they’re increasing by two to three percent every few months outside of your control. But as cliche, as it might sound, you have to focus on the things that you can control and block out all the rest.

Hopefully, this article has given you a helpful place to begin clawing back and reorganizing a few processes and approaches. It won’t happen overnight, but you can begin to right the proverbial ship.