How to Cut Costs in the Supply Chain

How to Cut Costs in the Supply Chain

Cost-effectiveness is one of the best ways to gain an advantage above your competitors in the supply chain business. If you do more than break even and walk away with a profit, then you have a sure plus on your side that gets you ahead. However, if you’re the other company in this equation, you are paying too much – and hiking your costs. There are many practical ways to cut costs in the supply chain business without needing to drop the level of quality you provide. Here’s what you can do to cut your costs in the supply chain business.

How to Cut Costs in the Supply Chain

Supply Chain Cost Assessment

The first step to supply chain cost reduction is to know what your expenses are. Assess your business, and get your hands dirty by getting right into the numbers of how the business works. This can be as simple as money-in versus money-out.

Once you have established these two columns, it’s time to write down more individual costs. Always do market research to find out what others are paying for the same services. Do you have the advantage here, or do they?

Vehicle maintenance and fuel are some of the more important costs to assess. However, it’s also important to make sure that you only cut costs and not the quality of your service.

Here’s what a supply chain business should look at to reduce costs.

1. Maintenance of Vehicles

Vehicle maintenance isn’t a business cost that should be cut. Instead, it should be the opposite. If you maintain your business’s vehicles, then there will be cost savings in the long run.

If you don’t maintain the vehicles in your supply chain fleet, you will pay far more for breakdowns and fuel usage. Keep your vehicles in good condition, and they are an advantage.

2. Alternate Fuel Providers

A supply chain provider can put too much of their money into fuel. Although fuel is an essential that can never really be cut, alternatives can be sourced.

If you are paying too much for fuel, find other fuel partners who charge less for the same. Comparative alternatives (that your competitors are not using right now) can always give your company the upper hand.

3. Responsible Drivers

A supply chain company should always hire the most responsible drivers. Responsible drivers mean that there’s a reduced rate of accidents in your business – and a lower repair rate tied to the supply chain company’s finances.

Responsible drivers also have the benefit of driving your insurance costs down. If your drivers know what they are doing on the road, premiums are lower.

4. The Best Insurance Premium

Seek the best insurance premium by shopping around even if you have been with the same company or insurance firm for several years. It never hurts your cash flow to search for a better option.

Loyalty to insurance providers can sometimes mean that you pay more to keep a fleet on the road. You never know, there could be a much cheaper option (with sometimes better coverage) right around the corner.

Improving your insurance premium can often reduce your overall business running costs without any reduction in service quality.

Additional Reading: How can today’s supply chain disruption cut costs and improve control?

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