8 Simply Ways to Reduce Costs in Your Supply Chain

Posted by George Muha on Feb 12, 2016 4:47:40 PM

IIn the midst of the Great Recession, employees were tasked with wearing multiple hats in order to keep their businesses afloat. During the hubbub of receiving orders, dealing with customer problems and getting product out the door, a lot of simple tasks got rushed and corners invariably got cut. As a result, mistakes piled up and far fangled patches were used to fix already broken processesall at the expense of the company’s bottom line.

Now that companies are able to catch their breath, there is an opportunity to start to find some low hanging fruit in their current processes. One place where companies should put a lot of focus is their supply chain. That is because tons of research (by Gartner, Bain, Accenture, etc.) indicates that companies that gain efficiencies within their supply chain earn greater profit margins and have more share holder value than their competitors.

To help companies identify some low hanging fruit within their supply chain, here are 8 lesser known, easy to adopt techniques that can streamline manual functions and increase gross profits right away.

1.  Freight Audit & Payment

Because an invoice is usually generated for every shipping transaction, freight bill reconciliation is one of the most time consuming tasks for a company. There are a quite a few very qualified companies that will perform this task more efficiently and cheaper than a company can on their own. If this function is not currently outsourced across all transportation modes, company's are throwing money out the window.

2.  Change Prepaid & Add Shipments to Collect

This is another area where people act like money grows on trees. If a vendor or supplier is charging for “shipping & handling” on their invoice, chances are they are marking up their freight charges. I’ve personally built profit centers for hundreds of companies using this technique, so I can assure anyone that converting these programs to collect to their own freight account is an easy way for customers to bank a ton of money.

3.  Unbundling Delivered Price Programs

I always cringe when people tell me how happy they are to get “free freight” from a supplier. Let’s get it straight right now…there is no such thing as “free freight”. The cost for shipping is baked into the cost of the product. Extracting the true costs and shipping via one's own transportation account has the possibility of yielding a tremendous windfall of benefits.

4.  Location Optimization

There are a ton of negatives by not having a good handle on inventory management. One killer is the premium companies pay by shipping from a less optimal shipping point. Companies are floored when I show them the difference in freight costs this inefficiency creates. Seeing this lost cash usually gets companies off the schneid and forces them to ensure inventory is stocked at the cheapest shipping point.

5.  Pool Distribution Channels

Shipping via less-than-truckload mode is probably the most inefficient ways of shipping a product, next to air freight. By identifying shipping patterns and volumes to a certain geographic area, companies can build a full load of multiple orders and have it delivered to a distribution hub for local delivery. Contrary to popular belief this usually speeds up delivery time and melts away costs.

6.  Zone Skipping

Zone skipping is basically pool distribution for parcel. Since parcel agreements are priced out more expensive for further away geographic zones, identifying heavy volume territories pays big dividends. By consolidating multiple shipments onto a large load and delivering it within a particular zone for local delivery is asmart way to slim down parcel costs, increase delivery times and lessen the likelihood for damage.

7.  Combining Shipments

Probably the biggest shipping no-no I see every week is companies shipping multiple shipments on the same day to the same customer. Companies might as well literally flush money down their toilet. Because of the way minimum shipping rates are structured, a lot of times it costs the same amount of money whether it shipped on one shipment or it combined two shipments as one.

8.  Build Truckload with Stop-offs

If building a pool distribution channel is not an option because of a lack of volume to a certain area, building a truckload with multiple stop-offs can be just as fruitful. Deliveries don’t necessarily need to be in the same areas. So long as customers are along the same route, creating a truckload with stop-offs is usually cheaper, faster and less risky than shipping via less-than-truckload.

In Summary

In the book The New Supply Chain Agenda, the authors put an exclamation point on the research that proves the advantage companies have who adopt supply chain related efficiencies over their competitors. However, they also say their own research indicates that less than 15% of companies even have a supply chain strategy. For those looking to edge out their competition, implementing some of the suggestions above is a great start!

These are just a fraction of the way that KDL's freight cost containment services can yeild big savings in cost reduction and efficiencies.  Check out our case study and call us to see what we might be able to do for your company.

Click Here to Download  the Case Study

Topics: freight savings, Cost Reduction, Streamline Processes

Eliminate Data Entry in Shipping Forever!  Download Eye-Popping Infographic

Subscribe to Email Updates

Recent Posts

Follow Me