Post-Pandemic Supply Chain Cost Optimization

Businesses have always put a firm focus on keeping costs to a minimum as any expenditure is going to have a direct impact on net profits once all is said and done.

However, the global COVID-19 crisis has forced many organizations in almost every industry to tighten the purse strings even further and find ways to optimize outgoings as much as possible. Fluctuating business, increased customs costs brought about by geopolitical events such as Brexit, and rising transportation expenses caused by, among other things, the Russian invasion of Ukraine, are all hitting supply chain organizations hard.

Cost optimization is the order of the day then, but what is the best way to go about it, without negatively impacting overall service and customer experience.

Cost Effectiveness

To make changes to your organizations outgoing spend, you first need to lay out a solid strategy which lays out how exactly you will achieve each step in the process.

Which benchmarks are specific to your industry? What is the minimum spend you can accept in each area without causing degradation of function? which KPIs will tell you whether your efforts have been successful or not? You will also need to involve external suppliers and contractors – couriers/drivers for example – to get a handle on the areas where alternatives are available, or negotiation is possible and involve your own procurement and logistics teams in the process.

Following these steps will ensure you are in a strong position to set priorities regarding cost optimization and create an environment of open discussion and idea-sharing which will give you a complete picture of your organization and the areas in which savings can be made.

AI and Automation

One of the best ways to reduce costs in any supply chain operation is to deploy AI and automation technology. With this technology at your disposal, you can leverage data and analytics to identify and optimize cost savings far more effectively than you otherwise would.

Automation doesn’t need to involve costly robotics or another machinery. It can be something as simple and inexpensive as introducing new automated workflows which can notify you of supplier disruptions or place orders when inventory levels reach a certain threshold.

The main goal with automation is to identify areas where repetitive and labor-intensive tasks which currently require human input are costing you more than they should. Of course, it is important to communicate to your people these measures are intended to make their jobs more efficient, not redundant.

Inventory Management and Tracking

During the exploratory stage of this process, you’ll likely discover that one of the biggest money sinks in your operation comes as a result of inaccurate inventory management and lost/wasted products.

By introducing RFID technology to your inventory management system, stock can be updated accurately and automatically in real-time. Each product containing a microscopic RFID chip can feed back to central servers and the cloud and make sure all stakeholders are on the same page when it comes to inventory.

RFID technology also brings fantastic tracking capabilities which mean, once a product is in your logistics network, it can be logged at every stage of its journey. This means areas where waste and loss occur regularly can be easily identified and addressed.

Software Consolidation

There are so many options when it comes to enterprise software today and they should be making your operation more efficient and dependable. However, when multiple applications are running independently of one another it can have the opposite effect – driving up inefficiency and siloing data within disparate platforms – as well as increasing costs.

However, with a review of your organization’s software library you will likely find there exists a single platform which can do the work of several independent ones. You may also find that separate departments within your organization are using two different platforms which ostensibly perform the same function.

With most modern software operating through subscription model, consolidating the number of platforms your organization uses into the fewest number possible will not only improve communication and collaboration across your operation, but reduce monthly expenditure as well.

Final Thoughts

There are of course many other ways to optimize costs than the ones we’ve outlined above, but these should hopefully provide some inspiration to get you on the right track when it comes to your organization.

Optimizing costs will not only make your organization more competitive on pricing but can actually make it more effective and efficient than ever before. While it’s still true that you need to spend money to make money, the benefits of modern technology mean you may not need to spend as much as you think.

You can hear Novo Nordisk Inc. Senior Director of Supply Chain Melissa Dubicki speak on how cost optimization and efficiencies are key to driving growth at LogiPharma 2022, taking place in September at The Westin Copley Place, Boston, MA.

Download the agenda today for more information and insights.