How Improper Supply Chain Management Affects The Bottom Line

Date Published September 21, 2012|Published By admin

In recent economic times we’ve seen how increasingly competitive business has become with many companies attempting to diversify and enter new markets. An essential component of a businesses’ survival is the reliability of their supply chain management…

A supply chain connects suppliers with customers; if improper management occurs on a regular basis then this increasingly hinders the performance of a business and their bottom line profits.

So what are the related issues that can affect a businesses’ profitability? To help business owners think about the “back stage” processes and why they’re important, we’ve discussed two issues which we feel have a significant impact:

Difficulty in determining the optimal amount of inventory levels

A common issue in supply chain management is not being able to determine ideal inventory levels. When transport companies fail to dispatch orders on time or there is a delay in the delivery of cargo often this can directly lead to improper evaluation of inventory.

So typically a business would replenish its inventory levels when stocks are low, however, when a business orders new inventory during periods of high consumer demands such as Christmas, then it is relying on what’s known in the industry as a “just in time” supplier. This process in a nutshell, is when your supply chain is managed so well, that you’re never losing money from the storage of your items – they’re picked up as soon as they’re ready to come in or go out of your warehouse.

Increased labour and transportation costs

If you’re forking out a lot of money on your supply chain management and transport, you will usually have to raise prices on your products to compensate. With the retail market now so competitive with online buyers, even the smallest rise in prices can be detrimental to a business and its profits.

Getting a handle on your supply chain management from an organisational aspect and a financial aspect can have a strong impact on your profit margins down the track. The trick is finding the balance between the right price and the most reliable service.

If you’re not sure how to evaluate different transport service providers, we advise you to give us a call and talk to one of our staff. We can inform you on our highest priority areas and help you decide for yourself whether we’re the right fit for your business.