Supply chain costs add up quickly. Without a thoughtful product procurement strategy, you could shell out thousands for slower shipments of lower-quality products. By identifying sources of waste and filling gaps with better practices, you can save money and develop a sustainable supply chain simultaneously.
Other business expenses reveal wasteful spending, too. Marketing channels that don’t deliver leads or customers can’t hide that fact. Bloated leases and bad rental agreements can’t compare to better deals. Supply chains disguise waste as a necessary evil. But with some insight, business owners can cut 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 gain access to bulk pricing discounts. That could save your business thousands of dollars per year.
Group purchasing organizations help companies leverage their collective purchasing power to get better deals from retailers. When you negotiate under the banner of a GPO, you get the same products for less money, plus the opportunity to talk with organizers and members about potential upgrades. With more knowledge, more resources, and more leverage on your side, you can save money and buy better products in one 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 buy your stock and you’d need to resupply, anyway. In most cases, you end up with far more product than you need and no customers willing to pay for it.
Avoid the pain of bloated warehouses by buying only what you need to resupply after fulfilling your orders. Better tools and software can help you create a more sophisticated process to anticipate demand for your goods, but if you don’t have those analytical tools, a replacement policy will help you in the meantime. A little research on sales projections in the beginning could 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 people who listen to them. Rather than tell your employees what to do and how to do it, listen to their feedback and consider making the changes they recommend. You can’t please everyone all the time, but the people on the ground probably have a few efficiency tips that management needs to hear.
Research proves that companies with happy employees who feel heard outperform their competitors. Humans touch your products at several points along your supply chain; many of them can tell you exactly what they think about inefficiencies in your current processes. People don’t enjoy doing repetitive work or dealing with outdated policies. Give them a platform to tell you what you’re doing wrong, then fix it.
4. Labor and Time Gaps
When your products sit in warehouses for a few days, you pay for those inefficiencies in unnecessary supply chain spend. Employees deal with your goods more frequently than necessary. A small, unpredictable trickle replaces regular, dependable shipments, and the uncertainty forces you to stay vigilant and waste money just to keep the business running.
Replace the status quo with scalable processes by identifying opportunities to improve. Where do products sit for extended periods of time? Which groups of employees end up sitting around because they have nothing to do? You can usually identify these areas with a bit of conscious effort, but if you never look, you’ll never know.
These hidden areas of supply chain waste could be costing your company 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 the same job for half the price, you lose money every day you put off the switch. Save money in your supply chain, then use those funds to grow your business and put your optimized processes to work.