Procurement and supply chain are often bogged down with the pressure to deliver for price reduction. They look for the most effective solutions to reduce costs while being able to maintain and continue to improve customer service.
Let’s share with you four solutions that can consistently make the biggest impact on procurement and supply chain cost optimization.
#1 Inventory Management
The key challenge for supply chain companies is to improve fulfilment rates and product availability while simultaneously reducing their inventory. We have a set of questions for them, by answering which they can make a right balance for their company.
- What factors acted as triggers to restock your inventory?
- What is your inventory capacity?
- Are you leveraging order cycles?
- Are you taking proper protection measures against stockouts?
- What is the right level of safety stock to prevent stock outs during emergencies?
If you are able to achieve the right balance, you will be well-positioned to improve margins and maximize profits. There are various tools such as materials requirement planning worksheet, which can help you evaluate how much inventory you need to fulfil sales demand without relying on safety stock.
#2 Purchase Centralization
With the growth of a company, whether in terms of geographic expansion, acquisition, or by product line, it is not anything out of the ordinary to experience fragmentation when various divisions act autonomously. It may result in a fragmented spend though and could be difficult to achieve any sort of cost saving goals. But you can make it if you centralize your purchasing workflow. Buying in bulk strengthens the hand-in negotiation opportunity, as it gives you far greater purchase power.
#3 Managing Risks Capably
Your organization should have a plan in place to identify, evaluate, mitigate and respond to any unexpected economic events or to a supply constraint situation. A supply chain risk management plan can help you reduce vulnerability to your operation through continuous risk evaluation.
And, that will enable you to identify potential risks to your supply operation, assess the situation, find ways to mitigate the situation, and continue to monitor until you are back to regular operations. Consider this current pandemic situation post-COVID outbreak. Those organizations which already have had their risk management plan might have been able to face this challenge. Risk assessments and audits can go a long way in ensuring business continuity and cost optimization.
#4 Linking Process with Technology
You have to use currency data analysis technology to understand that the exchange rate of a currency is influenced by the changes in the exchange rate of another currency. Technology can enable you to understand the systemic pattern of their changes and based on this pattern, you can make predictions by creating equations. Technology can drive down the cost, improve customer management and provide a holistic view of every function to facilitate fair and timely value chain decisions.
Investing in a top-notch technology will enable you to easily track movement of products and facilitate consistent communication for improved supplier relationships while reducing customer service constraints. It will empower you to drive down costs and boost your bottom line.
By addressing these areas, you can achieve greater efficiencies in your procurement and supply chain business and optimize costs.
Looking to take the next steps to boost growth of your supply chain business? Include well-trained and knowledgeable professionals into your procurement and supply chain management team. You can also encourage your team managers to undergo a supply chain management training to level up their skills.
See into the details of the Supply Chain Management Training Course at Promise Training & Consultancy.