In Part IV we reviewed Brian Solis’ TechCrunch post on Fear Kills Businesses Dead where he proffered twelve generic suggestions that any company can use to grow in this economy. In Part V we reviewed ten essential strategies for weathering the economic storm from Christopher Lockhead’s guest post on Dan Farber’s Outside the Lines CNet blog. In today’s post, we’re going to cover 10 supply chain initiatives that you can use as a buyer to not only help your company survive in this downtown, but actually thrive, courtesy of Terry Harris of Chicago Consulting, as posted in this Industry Week article.
- Redesign your Distribution Network
It’s been well establish by both analyst firms and leading vendors alike that decision optimization can save a fortune — 12% on average (according to two back-to-back studies on advanced sourcing strategies from Aberdeen) and up to 30% or 40% on some categories when deployed for the first time. Furthermore, in my experience there are two areas for unprecedented savings opportunities: services contracts and network re-design to optimize logistics spend, inventory holding cost, and import and export tariffs.
- Compete on Service
If you’re providing a product that is essentially a commodity, in this market, you’ll be price-pressured to the brink of bankruptcy if you try to compete on price alone. So compete on service. Make your customer’s life easy and be a joy to work with. If they struggle with inventory, offer VMI. If they struggle with logistics, offer 3PL services. Etc.
- Re-bid Your Freight Spend
Due to rapidly declining demands, ocean freight rates have dropped more than 50% from last year’s summer highs. Rail and Intermodal traffic has also been dropping at a rate of 6% to 10% a month for the past few months, and rates have been declining steadily as well. It’s a perfect opportunity to put your freight out to tender.
- Invest in Non-Transportation Resources that Offset Transportation Costs
Inventory, smarter labor, and better technology can all reduce transportation costs. Reducing inventory, and storage space requirements, can halve overhead costs, which can be as high as 30% to 35% of product value in some companies. Better technology can streamline operations to minimize logistics and storage costs. And smarter people, properly trained in the latest best practices, can find innovative opportunities for reducing spend further through award reallocation, innovative ideas for packaging reduction, etc.
- Fill Orders Smartly and Flexibly
Only ship from a single location, and make as few shipments as possible. If you’re fulfilling orders for multiple customers from overseas locations, ship them in one shipment to a local warehouse at the port and then divide the order into separate trucks.
- Optimize Safety Stocks and Order Quantities
Make stock/no-stock decisions based on profit margins and SLAs, use pull deployment across the board, and optimize order quantities. Don’t stock low-demand low-margin non-critical items, reserve your costly storage space for high-demand, high-margin, and critical items necessary to fulfill SLA requirements. Implement up-to-date supply chain visibility applications that pull when a trigger point is hit.
- Accelerate your Forecasts
Increase the frequency at which your forecasts are updated to better sense, and respond, to demand changes. Monthly forecast updates become weekly, and weekly forecast updates become daily. Review exceptions as soon as they arise.
- Re-engineer Packaging
Packaging costs money. A lot of money. There’s the material cost. There’s the storage cost. And there’s the transportation cost. Find a way to use less packaging for all of your products.
- Use Cost-Effective Transportation Modes
Don’t expedite. Don’t use air. Etc.
- Go Green
You can go green and save money. Less waste, reduced disposal costs. Less fuel, smaller transportation costs. Savings opportunities abound.