How to combat rising costs in the supply chain

A report by a consultancy firm, Delaware revealed that a third of businesses identified rising costs as the key challenge facing their business in 2020 and beyond. This was followed by the rising cost of shipping goods at 22%. The survey was carried out in January and February 2020 before the impact of the COVID-19 pandemic had begun, but the message was clear - controlling costs is now more important than ever. While we continue to adjust to the effects of the pandemic, economically and operationally, smart businesses are doing all they can to drive down costs and streamline processes.

Read on to discover some actionable ways to combat rising costs in the supply chain. 

Controlling costs -  preparing for the ongoing impact of COVID-19

While the impact of the pandemic continues to grip the US and global economy we can only wait to find out exactly what the impacts on procurement and supply chain will be. The best course of action is to look at where costs can be controlled and where processes and operations can be streamlined (more on this later). 

Richard Seel, managing director (UK & US) at Delaware, had this to say: “Spending cuts and much tighter cost management will be an inevitable and pragmatic response to the virus outbreak as manufacturers look at ways in which they can improve the bottom line. 

“Yet, the pandemic is set to have a far-reaching, long-term impact on the manufacturing sector, so manufacturers will also need to look at how digital transformation and the use of the latest advanced technologies can keep costs under control over the longer term.”

The types of cost reductions possible will depend on the nature of your business. Here are some key areas to consider for controlling costs. 

1. Review labor and personnel costs. This doesn’t necessarily mean reducing headcount or salaries. Take some time to look at your workforce as a whole and identify opportunities for efficiencies, smarter recruitment, or reduction in staff turnover. 
2. Invest in the right technology. While this may mean a large initial investment, introducing cloud technologies, for example, can save a great deal of time and money in the longterm. 
3. Harness your data. Understanding your big data - company-wide - can help you make far better business decisions and means you can plan more effectively. 
4. Improve visibility. This includes employing robust forecasting software and analyzing patterns in client demand. 

Identify ways to streamline processes

The research from Delaware revealed that a quarter of companies cited reducing operating costs as one of the top supply chain challenges. This was followed closely by getting products or services to market quicker, with 22% of the vote. 

Whether you manage everything internally or outsource particular elements, it is vital to make your ordering process as efficient as possible. Firstly, you need to have a complete understanding of your whole supply chain. Secondly, make sure your data and resource planning and management systems are integrated. 

Once you have your high-level view you can identify areas where blockages or problems are occurring and devise ways to tackle these. Perhaps there are places you can improve the accuracy of your forecasts, or optimize production lines, for example. Using a single software package to manage requisitions is a good idea. You might also review your approval processes to reduce bottlenecks while making sure you don’t compromise on product quality. 

Keep both the short and longterm requirements of your business in mind as you review your processes. Whatever the impacts of the pandemic, the more prepared you are the better. 

Continually striving to drive down costs, while not forsaking quality and great customer service is key to your success. Understanding your supply chain in its entirety and getting a better understanding of how to serve your clients and customers in the future will help you identify areas for improvement before they impact your business and service provision. 

We’re willing to bet that putting the preparatory work in and taking the time to analyze every aspect of your supply chain means you’ll reap the benefits in the long run.