4 Ways to Tell If There Are Costs to Squeeze Out of Your Supply Chain
As we approach 2025, uncertainty around economic growth is top of mind for many business leaders. Industry trends suggest that the coming year will be a time to focus on optimizing operations and making supply chains as efficient and cost-effective as possible. Forward-thinking companies are already adopting strategies to streamline their supply chains and reduce costs.
Here are four ways to quickly assess whether your supply chain has untapped opportunities for cost savings. If your answer is “no” to any of these questions, chances are you have room to reduce expenses and improve your bottom line.
- Have you run thoughtful RFPs on direct and indirect materials?
Efficient purchasing begins with ensuring that your pricing is market competitive. Running Request for Proposals (RFPs) for both direct and indirect materials can uncover significant savings.
- Direct Materials: These are often scrutinized, but there may still be opportunities to negotiate better terms.
- Indirect Materials and Services: These often go unnoticed but can harbor hidden costs.
Understanding pricing drivers and leveraging market research can lead to cost reductions from suppliers. For more insights, check out our blog: The Costs That Live in the Shadows: Indirect Spend.
- Can you say, using data, that you’re operating with the right level of inventory?
There is an optimal amount of inventory for every business, determined by operational parameters and customer needs.
If you haven’t analyzed your inventory levels using data-driven insights, there is likely an opportunity to reduce excess inventory, improve cash flow, and optimize storage costs. An effective supply chain planning process is key to achieving this balance.
- Have you eliminated overtime?
Overtime can be a necessary evil, but it’s often a sign of inefficiencies in the planning process. Teams can often find ways to operate without overtime when constraints force them to think creatively.
Implementing an extended planning outlook, such as SIOP (Sales, Inventory, and Operations Planning), can help reduce overtime by allowing you to leverage part-time or temporary labor instead of costly overtime hours.
- Do you have an effective freight mark-up policy?
Freight can be a hidden cost driver, particularly if your company provides delivered pricing or prepay & add services.
Key considerations:
- Do you account for all logistics costs, including labor for your team?
- Is your delivered pricing strategy robust enough to absorb freight cost increases?
- Do you have mechanisms in place to stabilize freight costs for the duration of your pricing agreements?
Addressing these questions can ensure that your freight operations are not eating into your profitability.
Other Opportunities for Cost Optimization
Beyond these four areas, additional supply chain cost-saving opportunities include:
- Warehouse operations: Streamlining workflows and improving layout efficiency.
- Packaging optimization: Reducing packaging costs without compromising product protection.
- Purchasing methodologies: Leveraging bulk buys, supplier consolidation, or long-term agreements.
If you answered “no” to any of the above, you likely have low-hanging fruit to address in your supply chain.
Partner with Waypost Advisors
At Waypost Advisors, we specialize in helping companies optimize supply chain management and execution. Our industry-experienced advisors focus on:
- Reducing costs through proven supply chain solutions.
- Minimizing inventory to improve cash flow.
- Enhancing team performance and satisfaction.
By leveraging innovative, best-fit practices, we streamline operations, reduce inefficiencies, and deliver sustainable results for our clients.
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