Your supply chain could be losing money without you knowing. Profit leaks might be happening in areas that are often overlooked. Pinpointing these leaks can be simple once you know what to look for.
Are you aware of the hidden inefficiencies impacting your bottom line?
Fortunately, with the right insights, addressing these issues is usually straightforward.
Let’s turn to Rob O’Byrne for expert advice on discovering and resolving these leaks effectively.
Assess Your Supply Chain’s Profitability
Your supply chain could be leaking profits without you realizing it. With years of experience working with companies ranging from $1 million to $30-40 billion in turnover, I’ve found that many businesses face issues with negative margins on customer orders. But how can you measure this problem?
Take the Supply Chain Leak Quiz
This week, I’m presenting a quick quiz to help you evaluate whether your supply chain is experiencing cash leakage. I’m recording this from a hotel room in Perth, Western Australia, due to my travels, but I want to offer you valuable insights.
Here are nine questions to help assess your supply chain efficiency:
1. Do your customers vary by only about 100% in terms of their average order value?
For instance, if your order values range from $100 to $500,000, you’re likely to answer NO.
2. Do you have one standard service offer for all customers?
Consider whether all customers receive the same delivery terms, such as next-day delivery or three-day delivery.
3. Are all your customers in a similar market segment?
This question checks if your customers are from the same industry or sector.
4. Are all your products a similar size and weight?
If your products vary greatly in size and weight, your answer will likely be NO.
5. Is your customer service offer clearly communicated and followed by your customers?
Determine if customers adhere to service conditions, like cut-off times for next-day delivery.
6. Is your customer service offer clearly communicated and followed by your own team members?
Evaluate if your team consistently adheres to service promises or frequently makes exceptions.
7. Do you have products that require special handling?
This includes products needing temperature control, being classified as dangerous goods, or being fragile.
8. Can you clearly isolate logistics costs such as transport, warehousing, picking, and packing?
Assess whether you can separately identify these costs in your logistics operations.
9. Do you have good visibility of cost metrics such as the cost to process an order, to store a pallet, to pick and pack an order?
Determine if you have detailed metrics for these activities.
To analyze your response, watch the full video.
I hope that quick survey has helped you gauge how well your business handles customer and product profitability visibility. The questions are from a brief online survey we offer. If you’d like to try it out, here’s the link: https://supplychainprofit.scoreapp.com/
Related articles on this topic have appeared throughout our website, check them out:
- Energy and Labour Costs: 2 Top Warehousing Challenges in 2023
- Cost to Serve Analysis—And the Costs of Neglecting It
- How to Operate Your Distribution Truck Fleet at Less Cost
- Cost to Serve – A Smarter Way to Improved Supply Chain Profitability
- Reverse Logistics Management for Supply Chain Cost Reductions
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated December 06, 2023, under the title “Is Your Supply Chain Leaking Cash?“.
