Three Ways You Are Adding to Global Supply Chain Costs

Posted by Scott Byrnes on Tue, Apr, 10 2012 @ 4:36 PM

Scott ByrnesROI from Visibility Solutions is Clearly There – Here are a Number of Places You can Find It

Today, the vast majority of enterprise-class companies are global. Why? The benefits of sourcing from low cost countries and selling into new foreign markets are too strong to dismiss.

Unfortunately, many still make due with sub-standard global processes and technologies borrowed from domestic operations. Global transportation and supply chain visibility are two such areas.
 Here are some questions to ask yourself to highlight ways you may be losing money without the right processes in place for global shipments.

Over-Reliance On Expedited Shipping

While some shippers must always use expedited shipping because their products are time-sensitive, many organizations use it to compensate when something has failed in the supply chain. Examining opportunities to reduce expedited airfreight and move to ocean freight is always a good cost-reduction strategy for global shippers.
When evaluating this opportunity, ask yourself these questions:

  • Do I have enough visibility into my inbound shipments against orders to make trade-offs that will still meet customer demand without having to expedite shipments?
  • Do I need to pay for expedited inbound shipping from my suppliers? Where can I find more lead time in the planning process?
  • Is my inventory system giving me enough information about ordering timeframes so I can avoid the cost of rush orders?

Through better planning and supply chain visibility, most global shippers can reduce expedited freight by 15 – 20% annually. This translates to significant costs savings for global companies with even moderate shipping volumes.

Incurring Demurrage and Detention Fines

Demurrage and detention charges usually occur when planning schedules are out of balance, when communication and notification are poor, and when there are delays in clearing Customs. A company that routinely incurs these fees is likely not carefully monitoring cargo arrival and doesn’t have a sound understanding of in-transit cycle times.

Understanding your business processes is the first step:

  • How am I notified when freight arrives?
  • Am I clearing Customs as efficiently as possible so the free period in the terminal isn’t exceeded?
  • How can I further minimize transit times so I can return containers on time?
  • Can I improve my yard and dock operations to ensure maximum throughput and prevent trailer aging?

According to a study by the Aberdeen Group, real time visibility and coordination can help reduce demurrage and detention fees by 25 – 50%. (Globalization: Linking Supply Chain Transformation to the Profit and Loss Statement,” Aberdeen Group, Sep 2011.)

Poor Communication with Trading Partners

An unproductive use of your customer service representatives’ time is providing answers about deliveries that could be found online. Similarly, purchasing specialists can work more efficiently if they have two-way communication with vendors and shippers.

Ask yourself whether customer and supplier portals would free your staff to address more strategic initiatives.

  • How do I currently communicate delivery status to customers?
  • How do I place orders with my suppliers and receive delivery status from them?
  • How can I improve communication and information sharing along the entire supply chain?
  • What is the percentage of time my customer service representatives spend providing order status information?

According to the same Aberdeen Group report, a US-based consumer packaged goods manufacturer was able to drive the following benefits by improving trading partner collaboration and supply chain visibility:

  • Reduced number of days of inventory in hand by 24%
  • Reduced lead times by 28%
  • Improved on-time customer delivery from 33% to 74%

Making the Changes

Recognizing areas where you may be losing money due to lack of supply chain visibility is only the first step in improving operations. Implementing processes that improve the efficiency of those areas is the next step in reducing costs. With answers to these questions, you’ll be able to determine whether improved visibility into your supply chain will produce tangible results.Global Supply Chain Issues


Topics: Supplier Management, Purchase Order Management, Supply Chain Visibility, Product Classification, Order and Shipment Visibility

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