6 Solutions to Reduce Supply Chain Costs - Martin Supply

Reduce Supply Chain Costs with 6 Integrated Supply Management Solutions

Woman in storeroom using inventory scanner

Reduce Supply Chain Costs with 6 Integrated Supply Management Solutions

It’s no secret that the pandemic has disrupted every facet of the economy and impacted the way we go to market. Since the onset of the coronavirus, manufacturers have been struggling with logistical nightmares that have created production backlogs and skyrocketed the cost of manufacturing goods. From raw material shortages and shipping delays to skilled labor gaps, each link in the supply chain is under extreme pressure to perform and that pressure has resulted in rising operational costs.

How do manufacturers combat these rising costs without sacrificing quality and performance? There are countless opportunities for cost reduction throughout your organization. The key is to examine your current processes and explore ways to reduce the complexity of your supply chain and remove unnecessary costs and waste.

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6 Ways to Reduce Supply Chain Costs and Maximize Efficiency with Martin Supply Integrated Solution

Integrated solutions through Martin Supply can streamline every aspect of your supply chain to reduce cost, remove unnecessary waste and increase your competitive edge. Here’s how manufacturers can address the rising costs associated with short and long-term supply issues.

  1. Lower Transaction Costs
    The first step to cost savings is understanding what you are spending and where. When you perform a spend analysis, it’s critical to look deeper into the data to understand the transactional activity baked into your business today. Depending on the size of your organization, you could have a thousand vendors that make up your indirect spend. This analysis may also reveal that your ‘tail spend’ is driving a significant amount of back-office work in your business. Time spent setting up a purchase order (PO), managing invoices (cycle time) and negotiating pay terms takes time and resources, and each interaction comes at a price. In fact, the transactional costs to produce a PO for an organization can range from $35 to $1000 and are often overlooked. Generally, MRO transactions account for 80% of the activity within a business, but only account for 20% of the purchases.By consolidating vendors and transactional processes, you can reduce transactional costs, processing time and workload in your business. This can result in a significant workload reduction and more efficient processing time that ultimately drives savings to the organization.
  2. Negotiate Better Supplier Pricing
    One of the best ways to reduce supply costs is to negotiate better pricing with your suppliers. However, small to mid-size enterprises often don’t have the resources or purchase volume necessary to negotiate significant program discounts. Supplier consolidation can help drive aggregation of spend, allowing better leverage to negotiate deals with distributors and manufacturers to improve pricing, contracts and payment terms. Through strategic and tactical purchasing, you can also take advantage of established pricing parameters to eliminate rogue spend in your business.
  3. Process Improvements
    Another common area for cost reduction is the improvement of operational processes and improvement in production throughput. These initiatives are typically based on lean principles that drive efficiencies in an organization to help them be more competitive in today’s global marketplace. When done correctly, lean management can create huge improvements in efficiency, cycle time, productivity, as well as material costs and scrap, leading to lower costs and improved competitiveness. These principles are not just for manufacturing. Supply chain improvements, transactional efficiency and inventory management can all be impacted by identifying and driving waste out of the process. The goal is to eliminate waste which ultimately drives cost improvements in your business. Examples of efficiencies gained with integrated supply include improved inventory accuracy, reduction in supply base (tail spend vendors), optimized inventory footprint, reduced transactional workload, new product technology and free cash flow.
  4. Improved Spare Part Storage and Maintenance
    If your critical spare parts are not functional when you need them, your equipment will experience unexpected and costly downtime. Simple preventative maintenance activities supporting your spare parts can ensure the inherent reliability of the part when it is needed. Routine shaft rotation on motors, vibration pads on shelves supporting spare parts, and sealed storage for electronic parts are just a few examples of effective tools used to ensure your parts are ready for use when needed. Another way to improve your spare parts storage and save money on supply costs is to perform a storeroom reset. This activity assesses your storeroom’s current state, identifies better storage options for inventory items, plans for spare part reliability and organizes inventory for less waste, increased uptime and higher production output.Additionally, an efficient storeroom combined with a maintenance and reliability program can drive significant savings to a business. Preventative or predictive maintenance programs require detailed planning to drive improvements in machine uptime. It also requires an effective spare part inventory to ensure you have the right part, at the right time and in the right quantity. Having the inventory required to support a maintenance work-order already prepared, palletized and ready for use will improve the effectiveness of the maintenance team and ultimately drive improvements to the utilization of the asset.
  5. Better Inventory Management
    Inventory rationalization and consolidation efforts can streamline the inventory control of products and goods you have in the storeroom at one facility or across your enterprise. Improving your inventory starts with ensuring you have good data. Cataloging items by manufacturer name and part number is the first step in understanding your inventory footprint. Building that data across your entire facility or enterprise provides even more value. Maybe you have assets in multiple facilities that require similar spare parts. If it is the same spare part, having an enterprise view of that inventory is an effective strategy to understanding where the spares are located and provides the ability to share those spare parts across your business. There’s no need to purchase excess inventory and stockpile spare motors in each location as long as that inventory knowledge is efficiently shared across the enterprise. When one facility needs a part, they know exactly where to find it.There are other ways to save money on supply costs. Take a look at your storeroom. Do you have surplus or dead inventory items that are tying up cash and shelf space in your facility? Inventory items may be obsolete according to your needs, but that doesn’t mean there isn’t a market for hard-to-find items elsewhere. Look into options like inventory sharing platforms, asset recovery services including auction, liquidation, or after-market selling of this inventory to free up cash.Consignment is another option to consider. Rather than having to pay for inventory at the time of delivery, talk to your supplier about consignment services that allow you access to inventory items and pay for them at the time of use.
  6. Cleaner Data
    Did you know that MRO material spend can account for almost 20% of your annual procurement budget and is often more than 50% of the annual maintenance budget? Start seeing cost reductions and improved inventory visibility with better data reporting and analytics. In order to keep up with demand and manage supply spend wisely, data integrity must be a foundational part of your program. Tracking inventory information like vendor data, part numbers, stock availability, product recalls, item usage, fill rates, slow-moving or dead stock and warranty repairs can help you make data-driven decisions to manage inventory more effectively. Capturing the right data can optimize your production and right-size your inventory investment with a clearer view of inventory levels and availability across your business.

Start Saving on Supply Costs with Integrated Solutions

Martin Supply can help you avoid the high costs associated with ineffective MRO supply chain management by optimizing your purchasing, finance, logistics, warehousing and shipping operations. Simplify your supply chain with:

Learn more about Martin Supply’s integrated supply solutions.

At Martin Supply, we understand your operation depends on reliable access to the right parts at the right time. Let our experts assess your current state of operations and create a tailored solution to start saving money on your supply costs.

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