According to a study by Deloitte, 79% of companies with highly efficient supply chains achieve better than the average revenue growth within their industries; this shows just how pivotal your supply chain is for the fortunes of your business. The flipside of this is that a poorly-performing supply chain could prove disastrous by leading to lost revenue. Here’s five ways that your supply chain could be costing your business more than it can afford.
- Transportation costs
One way your supply chain could be exhausting your funds is through excessive transportation costs, one of a company’s biggest areas of supply chain expenditure. It is easy for a company to spend more than they should, with fuel being a significant financial burden already. Whilst there is nothing you can do about the cost of fuel itself, it is easy to reduce how much your business spends on it.
Inefficient driving behaviour is one of the main factors behind overspending on fuel; supply chain drivers can exhibit a number of different behaviours that will ramp up the amount of fuel they use. These include excessive idling, speeding and unauthorised vehicle use. Remotely monitoring these behaviours can make a real difference to cutting down on wastage, and should allow your company to reduce fuel spend by at least 10%.
Tracking these behaviours is now easier than ever, with fuel management systems able to relay estimates back to your dispatch centre. These systems inform you about just how much your drivers are costing your business, which will then allow you to intervene to ensure that your drivers are driving efficiently as possible.
- Poor inventory management
Your supply chain could be draining funds through poor inventory management. Although for many businesses, counting inventory isn’t high up on their list of priorities, it should be. By not keeping track of how much stock you currently have, you won’t have a handle on how much stock you will need in the future. This means you may either order too much stock or not enough; both of these scenarios can be detrimental to your company; order too much of a particular product, and you could end up wasting money if you cannot sell enough of it. Yet if you order too little, you won’t be able to fulfil customer demand, which may cause you to lose out on sales.
In fact, poor inventory management is often one of the major reasons that small businesses fail, and famously was one of of the main causes of the closure of the Canadian branches of retail giants Target. As their staff could not get to grips with their inventory management system, they over-ordered certain products, while their systems indicated that they had stock in some stores when they did not. This led to customers being unable to purchase the products they wanted, a basic situation which was ultimately the catalyst for the company’s downfall.
- Outdated financial practices
Many companies spend a staggering amount of their working hours on manual financial practices. Considering there is a growing amount of technology available which automates these tasks, an overreliance on manual accounting is an unnecessary drain on resources, in terms of both budget and how your staff spends its time.
A 2017 report by Tungsten Network revealed that UK businesses spend almost 6,500 man hours a year on tasks like chasing up purchase order numbers, processing paper invoices and responding to supplier enquiries. The amount of lost time spent on these practices equates to roughly £88,725 being annually squandered by the average business. As Rick Hurwitz, Tungsten Network CEO, said of the report: “If businesses aren’t tied up chasing invoices or receiving phone calls from suppliers doing the same, they have more time to explore opportunities for growth with existing customers and go after new ones.”
- Paying too much insurance
All businesses want to protect their stock and make sure they are covered in the case of losses; this often means splashing out on carrier’s insurance on premium goods. Yet, not only is this is hugely expensive—it may not even be necessary. If your business is self-insured then you may already be covered for the shipment and storage of goods, meaning that the extra money you are spending on carrier’s insurance is needless. Check over your business’ own insurance policy to ensure you don’t make this mistake.
You also should think carefully about what types of supply chain insurance you actually need and how much you are paying – it may even be worth consulting a company to give you advice on this. For example, Marsh’s Supply Chain Risk Management Practice (SCRM) involves a thorough review of a company’s potential exposures, such as non-physical damage events like strikes and natural disasters. If your own business is deemed not to be at risk to these events and you are paying insurance to be covered for them, you may want adjust your insurance programme accordingly. This again could reduce how much you are spending on insurance.
- Wasting resources
Misusing your supply chain’s resources could be another source of financial losses for your company. This can include overspending on fuel costs or over-ordering stock, but there are other ways that your supply chain can be reckless with its resources. One way is through reassessing the materials used in product designs; with many companies continuing to use expensive materials despite the fact that cheaper alternatives are available. Similarly, plenty of companies do not take recycling into consideration when it comes to their packaging or the products themselves.
Recycling materials can not only reduce a company’s outlay but help to improve a company’s standing with the public. This could result in an increase in profits, as research shows that millenials are more likely to buy from companies that are eco-friendly. Not having a ‘green’ supply chain could again lead to you forsaking money, but this time from customers.