4 Causes of Supply Chain Waste That Business Owners Overlook

Barney Wallcott / July 11,2020

Supply chain costs add up quickly. Without a thoughtful product procurement strategy, you could fork out thousands for slower shipments of lower-quality products. By identifying s of waste and filling gaps with better methods, you can cut costs and produce a sustainable supply chain simultaneously.

Other business expenses reveal wasteful spending, too. Marketing channels that don’t deliver leads or clients can’t hide that fact. Bloated leases and bad rental agreements can’t compare to better deals. Supply chains disguise waste as a required evil. But with some insight, companies can slice the fat without interrupting operations.

Check out these common supply chain money mistakes and how to correct them:

1. Unused Purchasing Power

Single buyers only have so much clout. Even if you consistently make large purchases from suppliers, your bargaining power is limited by your single-customer status. If you teamed up with companies with similar needs, you could access bulk pricing discounts. That could save your valuable business thousands of dollars per year.

Group purchasing organizations help companies leverage their collective purchasing capacity to get better deals from retailers. When you negotiate beneath the banner of a GPO, you get exactly the same products for less money, as well as the opportunity to consult with organizers and members about potential upgrades. With more knowledge, more res, and much more leverage in your corner, you can cut costs and buy better products in a single motion.

2. Bad Production Policies

No one enjoys an “Out of Stock” message, but you can’t solve your supply chain woes by buying up excess supply or overproducing in anticipation of potential demand. In an optimal scenario, people would purchase your stock and you’d need certainly to resupply, anyway. In most cases, you wind up with a lot more product than you need no customers ready to pay for it.

Avoid the pain of bloated warehouses by buying only what you should resupply after fulfilling your orders. Better tools and software will help you develop a more sophisticated process to anticipate demand for your goods, but in the event that you don’t have those analytical tools, an alternative policy will allow you to in the meantime. Just a little research on sales projections in the beginning can save you from constant clearance sales down the road.

3. Top-Down Communication

Happy employees are good for business, and the happiest employees work for those who listen to them. Rather than tell your employees how to proceed and how exactly to do it, tune in to their feedback and consider making the changes they recommend. You can’t please everyone constantly, but the people on the ground probably have a couple of efficiency recommendations that management needs to hear.

Research proves that companies with happy employees who feel heard outperform their competitors. Humans touch your products and services at a few points along your supply chain; many of them can inform you exactly what they think about inefficiencies in your present processes. People don’t enjoy doing repetitive work or dealing with outdated policies. Give them a platform to share with you what you’re doing wrong, then fix it.

4. Labor and Time Gaps

When your products and services sit in warehouses for some days, you pay for those inefficiencies in unnecessary supply chain spend. Employees handle your goods more frequently than necessary. A little, unpredictable trickle replaces regular, dependable shipments, and the uncertainty forces you to stay vigilant and waste money merely to keep the business running.

Replace the status quo with scalable processes by identifying opportunities to improve. Where do products and services sit for extended periods of time? Which groups of employees end up sitting around since they have nothing to do? You can often identify these areas with a bit of conscious effort, but in the event that you never look, you’ll never know.

These hidden areas of supply chain waste might be costing your business thousands of dollars, but don’t forget to look for easy wins, too. When trucks frequently ship your orders from warehouse to warehouse for no reason, you pay for that directionless transit. If one vendor could do exactly the same job for half the purchase price, you lose cash every day you put off the switch. Save money in your supply chain, then use those funds to develop your business and put your optimized processes to work.

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