Ideas on How to Reduce Supply Chain Cost

by Mike Starling

July 20, 2011

GOT STRATEGY? OK, let’s see what could possibly be driving up the cost of your supply chain operations? Carrier capacity is tight, so they raise prices. The price of diesel fuel is nudging $4.00 per gallon, so fuel surcharges are up. The value of the dollar has been falling, so you can’t get as much value for your buck as you could yesterday, so prices in general are going up. Golly, what’s a company going to do to help mitigate the cost of this steadily rising pricing tide? You do have a plan to help reduce your supply chain costs, right?

Ready, Fire, Aim! Managers in general tend to think tactically. Hence their “plan” for how to reduce cost boils down to, “What tactic can I pull out of my bag of tricks to mitigate the pain of this most recent price increase related to my ongoing operations with [X]?" It’s noteworthy that the famed Peter Drucker criticized managers in general for not thinking more strategically, noting that they generally “do the first thing that pops into their head.”

Managers who think strategically (or heaven forbid, have a departmental strategic plan) recognize that it’s not the big bang theory that reduces supply chain cost. It’s the incremental application of multiple complementary tactics supporting the cost reduction strategy (or strategies) that add up to create real cost savings.

Are YOU doing any of the following?

>Reducing Days In Inventory (eliminating deadwood on DC shelves)

>Collecting Faster, reducing DSO (who is abusing agreed payment terms?)

>Controlling Vendor Inbound (quit giving away $$ to vendors)

>Thinking regional for freight savings (LTL opportunities abound—really!)

>Enforcing Vendor Compliance (for both transportation and warehouse savings)

>Using SaaS to Save Yo’ Ass (upgrade to transaction-based systems)

Feeling overwhelmed? Get a coach! If you don’t have the time, horsepower, or expertise to pursue implementation of cost reduction/savings processes, programs, or solutions, then seek out expert help from a Supply-Chain Coach. A Supply-Chain Coach can help you identify the most beneficial opportunity and work side-by-side with you to ease the pain of implementation. Coaches typically have broad industry experience and focus on your ROI as their motivation for helping you. More importantly, a Coach can help “coach” you in the development of your strategy and recommend appropriate tactics to help you achieve your savings goal.

So, Got Strategy? If not, don’t you think it’s about time you got some?

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