RISING COST IN SUPPLY CHAIN
MANAGEMENT
Supply Chain Management(SCM) is the exercise of synchronizing various activities from obtaining raw materials to conveyance of output or service at its very last.This involves making plans, sourcing, manufacturing, transport, distribution and returns.
Supply chains have been in existence for a long time, but companies have come to notice it as a value add only in current times.
PLANNING:
Planning is the course of movement in which the demand forecast is made, when this step is crafted as it should be half the task is accomplished. Today supply chain management software predicts demand based totally on diverse
facts and figures.
Every business should have an extensive plan to address unheard instances.
SOURCING:
KEY POINTS:
1.Circumscribe raw materials inside certain limits if viable.
2.Construct a varied list of sources for stock procurement
3.Swell your stockpile.
4.Connect with a Distributor
5.Leverage a Consignment Technique.
PRODUCTION:
This is the heart of the supply chain wherein raw stuff is transformed into finished goods. Assembling, trial and packaging are part of this process.
DELIVERY:
In this process goods are moved from one location to another. In this stage the end product is delivered from manufacturers to customers or retailers.This is a very critical detail which desires to be achieved with precision.
RETURNS:
It is the task of overseeing products that are returned to the organization.Quality control plays a pivotal function as faults in goods should be recognised to make certain changes in manufacturing .
SUPPLY CHAIN COSTS :
We can measure supply chain cost using the below formulae
COGS + Distribution cost + Other/Revenue *100
Wherein
COGS: Annual Cost Of Goods Sold
Other : Other Supply Chain Expenses
Revenue : Total supply Chain Revenue (This excludes revenue from selling company or supply chain assets)
Logistics Costs are soaring this is due to the current political situation which acts as a contributing factor for procurement disruptions and transportation issues.Although each company’s dynamics is exclusive there are some not unusual threats that all businesses confront.One of them is Cost Check.
Cost Control is the main KPI (Key Point Indicator)of any supply chain supervisor and therefore contributes to monetary stability of a business. All the operations in a business are intricately interconnected so one needs to have an in-depth knowledge of them before getting into it.
5..Drivers of Cost in Supply Chain:
PRODUCTION COST:
This cost is incurred when a product is manufactured or a service is provided.It incorporates both fixed and variable fees.
INVENTORY COSTS:
Inventory costs includes outlay interest of procurement,storing and handling inventory throughout the chain.A business needs to employ an effective inventory management system to track its inventory smartly.Its a basket term wherein Ordering , Conserving and Spoilage price will be a part .
LOCATION COST:
Facility area is a salient feature which influences efficiency of business as a whole..It is strategic,long term and non repetitive in nature.It plays a critical role in logistics management which facilitates calculation of accurate carriage points,generate targeted courses and optimize patron exigencies.
TRANSPORTATION COSTS:
Transportation refers to the shifting of goods from one position to another in a supply chain like materials making their way to the storehouse to deliver the finished product to the client.
INFORMATION COST:
Information is crucial to supply chain performance as it provides visibility which entails managers to make decisions.Without information one would lack readability as to their customer wishes, stock availability when more merchandise needs to be moved so on and so forth.
COST REDUCTION STRATEGIES:
1.MANAGE INVENTORY LOSS
2.LEASE THE RIGHT SKILL
3.MANIPULATE LOGISTICS
4 EMBRACE AUTOMATION.
HOW TO CONTROL INVENTORY LOSS:
Inventory shrinkage happens when a product fails to generate revenue as intended.It can be for various causes
Stock becomes obsolete
Employee shoplifting
Administrative Error
Vendor fraud or damage
Ways to beat inventory loss:
Appointment of inventory manager who can effectively and efficiently track items in stock and in transit.
Optimize warehouse security:
In a warehouse setting many conceivable threats can lead to accidents. Providing a conducive environment helps bring the best in employees leading to progressed productivity and performance.
By enforcing circumspection, companies can avoid hefty fines which they may be in all likelihood to stand in lieu of non compliance of warehouse security measures.
Create a barcode and SKU for each item.
Conduct regular inventory inspection.
Automate stock control.
LEASE THE RIGHT SKILL :
It is certainly a tough task to recruit and retain stellar talent as it is far more important to value control.Study shows average cost of per hire is $4700 and it takes 36 to 42 days to fill an average position append to it loss of productivity and training costs results could be mind boggling.
Emphasizing training not only promotes productivity but also creates seamless takeover from one employee to another in lieu of absence.
Automating humdrum tasks in addition to liberating resources additionally also increases momentum and precision. In spite of this advantage, it is the least favoured approach due to the theory of automation taking away human jobs.
Developing internal talent is by far more favorable than hiring from external sources because it takes time for a newbie to pick up the ropes of organization.
Evaluate existing perk strategy by drafting new perks policy centred towards employee benefits by providing budget alternatives.
MANAGE LOGISTICS:
Logistics management is key to cost Control.
5 Key elements of logistics
1.STOCK HANDLING:
Sound warehousing is a prerequisite for both manufactured and raw goods.Inventory management and warehouse optimization can lead to less cost and progressed efficiency.
2.MEET CUSTOMER NEEDS:
Constant analysis will keep business a step ahead in tracking customer requirements and toil to fulfill them by making timely and hassle unfastened delivery of products.
3.REDUCE INVENTORY LOSS:
Effective logistics practice ought to be installed to circumvent inventory loss which when overlooked will lead to improper handling,faulty packaging and so on.
4.MINIMIZE OPERATIONAL COST:
Focus should be on quality,quick grasp of issues and tailor made solutions,waste management minimization,applying modern advertising techniques and curtailing delivery cost by looking for cheaper options.
5.STEADY FLOW OF INFORMATION:
There needs to be a continuous glide of information be it order delivery or after sales troubleshoot .Efficient exchange of facts is key to customer contentment and retention.
Considering all these business dynamics one has to look for gaps in their plan, scheme cost cuts after weighing its effect best then execute.
