When looking to cut costs, hone in on inventory management

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Dive Brief:

  • Analyzing your company’s supply chain practices can not only help cut costs, but also create potential growth opportunities, Business 2 Community reported Tuesday.
  • Opportunities abound within warehouses, as shifting employee training, inventory management and transportation strategies can help increase efficiencies, thereby adding productivity while reducing costs.
  • In addition, by segmenting costs and identifying which segments are least profitable, warehouse managers can better decide where or whether to outsource processes to third party services or better integrate their demand-planning processes. 

Dive Insight:

While it is easy to focus on transportation costs as an opportunity for savings as the transport sector undergoes major shifts, the real cost-saving opportunities lie in inventory management since these factors can help improve demand planning processes altogether.

Inbound Logistics notes that, in most cases, transportation costs account for only 2-5% of total expenses whereas managing inventory generally consumes between 55 to 75% of costs. Lean inventories has long been a popular strategy for supply chain managers, but as the profession moves toward greater analytics capabilities and adapts to just-in-time production needs, demand planning has emerged as a promising strategy for cutting costs at the outset without endangering production needs.

Active demand planning involves goal setting, strategy development, clearly outlined tasks, and established deadlines designed to meet those goals. As demand planning’s true goal is the creation of a demand-driven supply chain, collaboration with both buyers and suppliers is key​. Therefore, all the processes outlined by Business 2 Community fall into place with this strategy: the people, technology, and processes must all be in place to deliver successful results.

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Filed Under: Storage/Warehouse
Top image credit: Ingram Micro

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