Most supply chains can be broken down into procurement costs, transportation costs, inventory costs, and manufacturing costs. In each of these categories there are simple techniques for reducing costs, but you need to ensure that you aren't creating additional costs in another category. For example, you can reduce purchasing costs by purchasing in larger quantities, but this will increase your inventory costs. So these decisions need to be made using a total supply chain cost approach.
- Saving money is great, but in a supply chain,…cutting costs in one place can increase costs in another.…So we need to take a broader view…to make sure we're having…a positive impact on the bottom line.…We get that broad impact…by calculating the total cost to serve.…We'll walk through an example to show you…how you can use a spreadsheet to calculate…the total cost to serve for a product.…If you have access to the Exercise Files,…you can download the spreadsheet and follow along.…
Let's say our company buys…1,000 widgets per week from a supplier,…and we operate for 50 weeks out of the year.…We'll analyze the total cost for these widgets…by looking at three categories,…purchasing costs, transportation costs, and inventory costs.…Purchasing costs are easy.…The supplier charges $5 for each widget,…and it costs us $50 to process the paperwork for each order.…Since we place 50 orders per year,…our total purchasing cost is $252,500.…
It costs $500 to ship each order,…so the total transportation cost…for 50 shipments, is $25,000.…
- Explore the fundamentals of source inputs within a supply chain.
- Examine the role of returning products in a supply chain.
- Determine how to calculate total costs.
- Explore the role of investing in flexibility when managing a supply chain.
- Discover how to increase visibility with a control tower.
- Identify the role innovation plays in supply chain management.
- Examine how artificial intelligence and machine learning help to monitor supply chain trends.
- Break down the fundamentals of selecting the right technology when implementing a supply chain agenda.
- Determine the best ways to collaborate externally when implementing a supply chain agenda.