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How to significantly cut costs while keeping your supply chain strong and robust.
Running a business, as you know, involves a lot of trade-offs: quantity versus quality, speed versus cost, and so on.
Supply chains have a myriad of costs to contend with. The more you intelligently cut those costs, the greater your ultimate bottom line.
Start with your vendors.
Have you involved enough vendors in the bidding process? Typically, it should be about three or four.
In choosing one, you need to go beyond product price and include promised delivery times, estimated shipping costs, insurance, tariffs (if applicable), reputation for dependability and more. Assign a value, as best you can, to each variable.
If you’re leaning toward one vendor in particular, compare their price to other bidders and use any lower bid to possibly reduce their estimate. You can also ask if the prospective vendor can bring any extra value to the table for the same price.
Focus on the product itself.
In researching your product’s design and materials, pull out the factors that affect the overall product price (raw materials, logistics, etc) and estimate the cost of each.
Have you compared overall costs with local sourcing alternatives? If your products require raw materials or components, are those sources close to the factory? If you source locally, have you considered procuring overseas? And if your product requires assembly, check multiple locations for the lowest costs.
Is there a certain product quantity that gives you an optimum price? In other words, where are the price breaks if any?
Speaking of costs, if you have multiple products, one way to save money is to consolidate your shipments. Another way is to make sure vendor invoices are carefully audited so you won’t get improperly billed or even double-billed.
In terms of shipping, which product quantity works out to be your optimal shipping price? Have you compared at least three or four vendors on their best prices for shipping? The range of quotes could surprise you.
Figure out shipping routes.
It’s rarely clear cut deciding which shipping routes are best for your individual situation. You have to balance estimated shipping times with estimated costs, while also factoring in issues like political stability along the way, possible bottlenecks and even the weather’s potential effect.
Let’s say you’ve done all that and have identified the most cost-effective shipper – but did you calculate any tariffs that need to be paid and devise a strategy for minimizing their cost? What else might be outstanding? In short, shipping costs involve a host of things that need to be checked off your list. You have to consider everything.
Wrap it all up with packaging.
A final step is to figure out your best packaging. Is it optimized to save you space and additional weight during shipping? Is your packaging more cost effective at the manufacturing unit or locally? What quantities and packaging sizes will enable you to optimize your container/shipping space?
