If you are a supply chain leader, your board and your CEO are likely telling you to do two things right now: Generate higher gross margins and decrease your fixed and variable costs, all while scaling up production. Both of these require a renewed focus on critical issues impacting supply chain management, including risk from geopolitical uncertainty, supplier solvency, or spiking raw material prices. From an efficiency perspective, healthy supply chains tend to be resource-smart, diversified across regions, and have excellent visibility throughout each phase.
Here are a few strategies to consider that help reduce supply chain costs.
1. Improve Cycle Times with Engineering Changes
Automation in manufacturing processes can significantly reduce cycle times.
Most manufacturing leaders value efficiency and productivity, but engineering solutions regarding supply chain cost reduction aren’t always top of mind. Here are several engineering strategies that promote faster cycle times, lower costs, and improve supply chain efficiency.
- Advanced automation and robotics - Introducing advanced automation and robotics into manufacturing processes can significantly reduce cycle times by streamlining production lines and increasing efficiency.
- Efficient Supplier tooling and machinery - Upgrading machinery and tooling to more advanced and efficient versions can contribute to faster cycle times. Ask your suppliers to invest here or consider moving production to a more capable supply base.
- Advanced materials and manufacturing techniques - Adopting advanced manufacturing techniques like additive manufacturing (3D printing) for certain components can reduce the need for traditional machining and assembly processes.
- Real-time monitoring and control systems - You can’t improve what you don’t measure. By utilizing sensors, data analytics, and feedback loops, manufacturers can identify and address inefficiencies in real time. Follow the data!
2. Mitigate Supply Chain Risk
Maintain visibility throughout the supply chain to help mitigate risk.
Supply chain disruptions are nothing new and in recent years, massive global disruption feels like the new normal. We’ve had it all: trade wars, regional conflict, extreme weather. Expecting the unexpected is good business—from a cost as well as a process perspective. Figuring out how to mitigate supply chain risk is one way to keep your balance sheet healthy during uncertain times.
Here are a few guiding principles to consider:
- Maintain visibility throughout the supply chain
- Diversify global regions
- Digitize your supply chain
Supply chain visibility is critical in today's fast-paced world. Everyone expects everything to be delivered rapidly, so you need to keep a pulse on every part of your supply chain. Software and AI have helped to streamline this process. Digitizing the supply chain gives you greater visibility into potential project breakdowns and improves efficiency and processes through automated workflows. It also gives real-time information about inventory, demand, and macroeconomic factors. Better visibility means more time to see issues as they arise.
By diversifying global regions, you can address risks such as natural disasters, geopolitical events, or supplier insolvency and develop a robust supplier base. For example, if an area of the world has an ongoing conflict, you can shift to another region (if you already have those relationships in place). A distributed supplier network also gives you flexibility in costs and lead times.
3. Build Sustainable Long-Term Partnerships
Seek stronger relationships with suppliers and vendors to increase collaboration.
Even though 71% of companies say they want to increase their U.S.-based manufacturing, and over half want to expand their North American supplier base, ultimately, supply chain teams are looking for better choices (whether North America or overseas). And they’re seeking stronger relationships with suppliers and vendors to increase collaboration and cooperation across supply networks.
Sustainable long-term partnerships add up to big cost savings, including per-unit cost breaks, volume discounts, and extended payment terms. More importantly, cooperation and collaboration translate to fewer project disruptions, less waste, and more flexibility in costs and lead time options.
Key Takeaways
Finally, I believe the most effective way to address supply chain cost and efficiency issues is by prioritizing technology and automation. Streamlining processes like procure-to-pay, invoice processing, and design for manufacturability increases the speed of task completion and reduces the time to market, which is highly beneficial to the bottom line.
It’s an exciting time to be in manufacturing, and the role of advanced technology and automation in mitigating risk, optimizing costs, and improving margins are within reach.
