6 Proven Cost Reduction Strategies In Supply Chain Management

There’s good news and bad news when it comes to cost reduction strategies in supply chain management.

The good news is that there are lots of tried and true ways to lower your costs. But the bad news is that there are lots of tried and true ways to lower your costs.

Yes, you read that correctly. There are so many ways to reduce supply chain costs, you are never done. There’s always something you can do to bring costs down. But that multiplicity of options can make it difficult to track everything and know that you are reducing costs on all fronts.

If you’re looking to start or improve your supply chain operations, the strategies below are a great place to start.   

Supply Chain Network Cost Reduction Strategies

These strategies will at least give you an idea of the breadth of ways in which you can improve your overall supply chain strategy.

1. Staffing – We went straight at this one because of the sensitivity surrounding personnel and their jobs. It doesn’t mean you have to reduce your workforce. But things like improved communications, training and attendance can make your supply chain more cost effective.
2. Inventory Management Systems – From supply ordering efficiencies, to minimizing spoilage and optimizing your raw materials usage, IM is one of the areas of your operation where you can find the most cost savings.
3. Warehouse Management Systems – Working hand-in-hand with IM, warehouse management helps you get the most value from what may be one of your largest fixed costs, your warehouse.
4. Transportation Management – From literal shipping and delivery costs, to the costs of inventory sitting on a dock, your transportation costs are probably higher than you think.
5. Supplier Management – If there is a cost that is almost immeasurable, it is when your supplier is unexpectedly unable to deliver. By working more closely with them and their systems, you can see the drop-outs before they happen and take steps to manage your lead times.
6. Third-Party Logistics – You can wrap up all the strategies listed above into this one. It is the business of 3PLs to lower your overall costs, improve supply chain performance and, ultimately, boost your bottom line with increased profits (if not, don’t use them).

If you enjoyed this post, check out our recent article about four supply chain optimization tips.