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Cost visibility in your supply chain: seeing how you can save

Jonas Mehrhoff
Jonas Mehrhoff
June 15, 2022
5 min read

Note on the authors

Heiner Murmann is the founder and CEO of Orkestra SCS, a logistics, technology and services company. In addition, Heiner serves as Executive Chairman for Evolution Time Critical and President of The Five Inc., and as an Advisory Board Member for both Metro Supply Chain Group and Black & McDonald Limited. Notably, Heiner previously held various senior executive roles at DB Schenker, one of the top three global logistics companies, as a Member of the Board of Management responsible for Air and Ocean Freight, and as CEO of the Region Americas.

Arnold da Silva, Senior Ocean Freight Advisor for Orkestra SCS, is head of an ocean freight consulting company where he actively advises global shippers on ocean freight strategy and execution. With 40 years of experience in the ocean freight industry, Arnold served as Executive Vice President for Ocean Freight Region Americas for DB Schenker. Arnold's passion is to conceptualize and implement innovative ocean freight solutions that transform one’s supply chain and promote a shipper's success.

Within a supply chain, it can be easy to get lost in all the intricate processes and functions happening on a day-to-day basis. Outsourcing services and delegating internal functions can make it so you miss some key players in your chain. While getting a grip on cost is always at the forefront of supply chain leaders’ minds, it is crucial to understand how to get there. By prioritizing visibility into some of the most important areas of your network, cost saving opportunities are not far behind.  

Supply chain cost and performance - finding the perfect balance  

When addressing the state of your supply chain and where the majority of cost lies, it can be difficult to come up with saving solutions that do not undermine performance. Of course we’d like to save, but not at the cost of reduced agility or customer satisfaction. By implementing a bird’s eye view approach of visibility, not only can you tackle challenges, but you are also able to see how these changes affect every moving part of the supply chain. As we all know, all processes are linked; they affect each other in ways we sometimes tend to overlook. Working to see the full picture will allow you access to all the necessary information you need to make informed decisions about where your cost visibility is potentially suffering. How do you address such problems? You look at a snapshot of your supply chain and plan ahead.

Supply chain disruptions - how to plan ahead

One of the largest and most volatile contributing factors to supply chain costs are the increasing global disruptions we’ve seen over recent years. From pandemics to political pressures, it’s difficult to imagine the market stabilizing back to what we would consider a normal state.  

To offset these stressors and realize cost saving opportunities, visibility is key. When the right parameters are set in place, it becomes much easier to detect issues and address them before they turn into a more expensive problem.  

Cost visibility - what are we looking at?  

It is important to understand the buckets of cost visibility before venturing to tackle problems. We have three distinct areas:

Freight cost

Freight cost visibility is concerned with how much your company spends on freight shipping, such as big cargo with far destinations. This type of shipping is often prone to accidents, therefore implementing more cost visibility into this area, you may uncover clear hurdles that are easy to remedy and that save money.  

Logistics cost

Logistics cost encompass how much your company spends on a scope of logistic activities including procurement, physical labor, storing and transporting goods, packaging processes and so on.  

Landed cost

Landed costs visibility is essential in understanding your ROI-the total cost of a product from initial production to a customer’s door. Here we focus on creation, procurement, and transportation of goods within your supply chain. Landed cost visibility shows you how much you’re paying for the creation and shipping of goods and what your profit margin looks like.

 

So, now that we understand the three buckets of cost visibility, what does implementation look like in a supply chain going forward?

Having a clear grasp on where your money flows in and out is essential. Detecting pain points becomes more manageable and real growth through visibility isn’t as out of reach. You might see some pain points in your freight cost for example and decide to go a different route, or with partners that align better with your vision. You may also find that the cost of production is high and a shift in materials or procurement might be the most beneficial solution. Managing inventory, refining ordering processes and tracking cost performance through visibility platforms could be the solution your supply chain needs, and visibility into these key areas was the missing piece.  

Whether your cost visibility comes out of a deeper analysis of your current processes, or implementation of a more advanced digital platform, cost saving opportunities are closer than you think.

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Cost visibility in your supply chain: seeing how you can save

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