Problems have arisen in supply chains across many industries since COVID-19 began. Companies have had to slow down or stop production to comply with their country’s pandemic protocols, leading to a shortage of goods and backlogs in their warehouses.
Some businesses are seeing a worker shortage due to retirements or other factors, creating a gap that leaves managers wondering what they can do. Here are six ways to cut costs in the supply chain.
1. Streamlining Processes
Streamlining processes is an excellent strategy for a company to impact its supply chain positively. It allows a business to increase its output and reduce waste. A first step could be to make processes simpler. Complex, multitiered methods can increase inefficiency because of the time needed for completion.
For example, a company could work directly with original equipment manufacturers (OEM) instead of third parties. OEMs can help businesses with reliability and reduce supply chain costs. Another way to streamline processes and save money is by upgrading technology. Modern machines are capable of amazing things and can increase production using strategies like automation.
Automation can be a practical solution in many industries to help supply chain management. Companies that turn to automated logistics solutions can make processes more efficient by taking humans out of the equation and instead using machines. Artificial intelligence (AI) has its perks over humans, including:
- Fewer small tasks: Automation becomes helpful when a company or industry faces a shortage of employees and management stretches the workers thin. Company leaders can use automation to take the menial tasks out of their employees’ hands and focus on bigger-picture items in the business.
- Increased productivity: People get tired, whereas automation can stay productive for long periods. AI can run around the clock performing tasks big and small for a company without a need to stop and rest. Continued productivity can increase a company’s output, reduce warehouse backlog and keep the supply chain moving. Some machines need human attention, but others can operate autonomously.
- Quicker problem detection: Autonomous machinery lasts longer than humans, and most of the time, it’s quicker at detecting problems. This notion especially applies to automation in information technology (IT). Automated machines can detect threats, immediately notify users and start mitigating the problem. Cyberthreats have increased since the pandemic, and AI can \monitor 24/7 with no human assistance.
3. Driver Training
A company’s drivers can cause inefficiencies and disrupt the supply chain. Teaching proper behavior behind the wheel can cut costs and improve their safety on the road. Some ways drivers can contribute to reduced costs are:
- Speed limit mindfulness: Staying at or under the speed limit helps save on fuel costs. Going over burns fuel faster, causing inefficiencies in the vehicle’s fuel economy.
- Air conditioning: A driver going 40 mph or slower on the road should open the windows and turn off the air conditioner. Turning it on only when going above that speed can save gas. Drivers should ensure the windows are up when the air conditioner is on. Closed windows make the car more aerodynamically efficient because of the reduced drag.
- Cruise control: Utilizing cruise control can be an effective way for drivers to cut costs. If they’re on the highway, employees using cruise control can increase fuel efficiency by changing the acceleration or deceleration. The best time to use cruise control is on a long stretch of highway. This feature can protect a car’s driveline, which is a practical way to save money on maintenance costs.
4. Preventive Maintenance
For a supply chain, vehicles on the road mean trucks are transporting supplies from one location to another. When the fleet has trucks undergoing maintenance, the supply chain suffers with fewer goods in transport, leading to backlogs in warehouses. One way to mitigate these issues is with preventive care.
Putting trucks and other vehicles on a maintenance schedule can save money in the long run. Regular checkups can detect problems before they worsen, decreasing the time lost from a truck in a shop. Putting trucks on a schedule also helps a mechanic’s shop backlog. Automotive technicians already have to serve many customers daily, so spending less time per vehicle creates a more efficient system for all parties involved.
Implementing telematics can be an effective way to reduce costs in the supply chain. Telematics combines two things: telecommunications and informatics. Informatics includes information systems like a computer, and telecommunications refers to devices like a cellphone. A company can use technology to send information from its machines to a computer for processing. Remotely transmitting information is a significant advantage for businesses across industries.
For example, a company employing drivers can monitor these employees using telematics technology. Telematics devices can detect if the driver is speeding, sitting idly, or stopping and starting frequently. This driver behavior can waste gas, costing money for their company.
Sometimes employees cause inefficiencies inadvertently, but other times they do them intentionally. Fuel theft is an issue that can increase waste and costs for a business. For example, an employee could buy fuel with the company card for personal use, which would be an unauthorized purchase. Telematics technology is smart enough to review all a company’s acquisitions and notify the business when an employee does something they’re not supposed to do.
6. Increasing Sustainability
The world has become greener as scientists warn about the effects of climate change. One strategy to combat global warming and cut supply chain costs is to make processes more sustainable for the environment. Sustainability in supply chain management matters because companies can reduce waste and water consumption, thus reducing costs in their operations.
Greener operations can save money and increase profits at the same time. Production costs go down with streamlined, efficient and environmentally friendly procedures. It also has an impact on the stores. Customers, especially younger ones, are more likely to buy from companies with sustainable practices than those without them. Reputation means a lot in the public eye, so environmentally conscious systems can go a long way for a business.
Cost-Effective Supply Chains
The pandemic has wreaked havoc worldwide, affecting businesses in various industries. Slowed or stopped production, worker shortages, cyberattacks and more have caused bottlenecks in the supply chain, leading to increased costs for companies and consumers. However, there are ways to mitigate these issues. Use these six smart ways to cut costs in the supply chain.