21 January 2023• 8 min read
Ways to Save in Global Supply Chain
Individuals and organisations that adapt to changes in business environment, give themselves a good chance of surviving the tough times.
The new year is an opportunity to make a fresh start and adopt best practices that have delivered positive results.
The business ecosystem is not an easy place to crack. Whether you are local, or a global player, cost and competition pressures require you to achieve better revenue and serve a bigger market. The Covid-19 pandemic and the war in Ukraine have adversely impacted the global supply chains. High cost of transportation and delays at the terminals impacted production and distribution of both essential and non-essential goods.
In this blog post, we have tried to list out 8 ways which can help you to save on supply chain related costs.
- Consolidation of cargo: When a shipper combines numerous shipments from one area into a single load that is transported by a carrier to a different area, this is known as freight consolidation. For shippers who routinely transport a few pallets or lesser quantities of goods, freight consolidation is suitable. You can avoid paying a higher cost by combining your smaller, regional freight. You can save money by shipping your goods in bulk as opposed to sending individual cargoes.
- Cargo insurance: Not every person in the international trade domain opts for insurance of their cargo. You are insulated from financial loss as a result of damaged or lost goods by cargo insurance. If a covered event occurs to your freight, it pays you the sum for which you are insured. The incidents that are covered by insurance are acts of war, piracy, cargo abandonment, road accidents, natural disasters, etc. Additionally, it differs from carrier liability and insurance policies, which are typically offered by freight forwarders and specialised cargo and freight insurance organisations.
- Transport Management System: A transportation management system (TMS) is a platform for logistics that makes use of technology to assist businesses in the planning, carrying out, and optimising the movement of goods, as well as in ensuring that the shipment is compliant, and that the necessary documentation is available.
A TMS offers insight into daily transportation operations, documentation and information regarding trade compliance, and assurances regarding the prompt delivery of freight and goods. TMS helps businesses to manage and optimise all aspects of their transportation operations, whether they involve land, air, or sea transportation.
- Shipping smaller quantity more frequently: By choosing to ship in smaller quantities, sellers can reduce exposure to demand fluctuations. This helps to optimize the whole supply chain, rather than hyper focus of saving freight costs at the cost of unsold inventory. Just in case there are quality issues with the first batch, the manufacturer can make required changes in subsequent batches. Smaller quantities help to absorb probable loss from cancelation of order.
- Risk management: Appropriate risk management actions shall strive to find a balance between doing too little and doing too much. For example, parties involved in trade shall not overlook the due diligence part, and nor should they devote unreasonable time and money on it as well. The agreement of sale shall have safeguards for counterparty risk and a mutually agreed dispute resolution mechanism.
- Effective use of Incoterms®: International trade involves transactions between territories that have different rules and regulations. Incoterms® are accepted by governments and regulatory authorities around the world. Parties involved in trade use Incoterms® to decide who bears the cost and when the risk gets transferred from seller to buyer. An Incoterm® might be more beneficial for one of the parties, and to safeguard their economic interests, parties shall have prior knowledge about what type of agreement they are getting into.
- Expertise in customs: Updated and correct knowledge about domestic and international customs helps to save valuable time and money. In cases where either party involved in the transaction fails to comply with customs laws, they risk causing time delays and end up paying monetary fines.
- Using business intelligence: In logistics, business intelligence, or BI, refers to a process or group of activities that enable managing the volume of data generated by the organisation to be converted into useful information that enables greater operation control and speeds up the process of making strategic decisions. Making data-driven decisions in real-time with the correct BI solution can enable you to optimise numerous business processes within your company and strengthen your partnerships.
Running a business, irrespective of its size, involves making multiple decisions. By having a strategy in place for each possible business action, you can reduce the occurrence of adverse events. Go ahead with your business plans and make it happen.