SC management - Reducing costs and generating revenue
Supply Chain Management has been of increasing importance in this scenery of recession. It is high time that companies re-assess their supply chain model, thus identifying and eliminating hidden unwanted costs in the supply chain.
There are certain areas which can be looked into with the aim of reducing supply chain expenses and seeking opportunities for cost reduction:
Inventory carrying costs is one of the key areas in which most of the capital gets blocked. As standard rule of thumb, inventory carrying cost is 25% of inventory value on hand. When high inventory level is unavoidable during a recession, it’s a great opportunity for the company to look into their inventory carrying costs to identify opportunities.
Transportation also needs to be evaluated for cost reduction.
Variable production costs include cost of labor, material or overhead. These costs change according to the change in the volume of production units and cost reduction can be done in this area through process improvements to reduce wastes in production and warehouses, such as waiting time, movements, etc.
Raw materials include both direct and indirect raw materials. In order to total inventory cost reduction, one needs to scrutinize, collaborate and partner with suppliers.
If one needs to use Supply chain as revenue driver, there is the need to look into these areas and prospects.
Supply chain service is one of the key areas which can lead to revenue generation and the company has to ensure order fulfillment and on-time delivery. Customer satisfaction through effective prevents loss of revenue and leads to future sales.
Supply chain solutions need innovation and flexibility in order to provide a solution as an enabler for market expansion without hurting the company’s bottom line.
Recycling, picking up disposed goods from the customers and reselling, is often a neglected area but can lead to new revenue channels while providing for environment sustainability at the same time.
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