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ASCM Insights

4 Ways to Ease Inflation in Supply Chain

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Supply chains continue to experience significant inflation-related cost hikes. Meanwhile, import, transportation and labor expenses are all going up, and excess inventory is driving down profits. Of course, this compels companies to hike prices. So, how can your supply chain organization keep costs low?

1. Identify high-impact issues. Examine inflation’s rising costs on an end-to-end basis to obtain full visibility into the supply chain areas being hit the hardest and to understand which issues can be mitigated. Risk assessments help keep costs under control, which is crucial as prices rise and more people face financial hardship. Whether using technology or measuring process transformation, end-to-end analysis can pinpoint areas in which processes are increasing costs and uncover other systematic sources of hidden expenditures.

2. Communicate price increases to customers. Information-sharing with partners is a proven best practice in any situation. But amid inescapable added costs — and the pressure to pass them on to customers — it’s even more essential.

3. Maximize available technology. A recent study by Bain & Company showed that investments in supply chain technology enabled companies to reduce lead times and deliver an inventory turn increase from 10-40% while improving cash flow. Some of the most promising solutions include artificial intelligence, which enables your supply chain team to understand complex information, driving enhanced human performance and improved decision-making; and machine learning to forecast demand with greater accuracy, optimize inventory levels and replenishment, and reduce errors. In addition, hyperautomation simplifies logistics by eliminating manual tasks and ensuring shipping strategies meet customer expectations. The addition of robotics increases order accuracy; improves delivery times; and — when coupled with AI — helps manage inventory, enhance communication and improve customer satisfaction. Overall, digitization of supply chain processes leads to greater information security, negating breaches and data exposure.

4. Cut costs. Begin by determining the exact expenditures for transportation, inventory and warehousing, which account for approximately 92% of all supply chain costs. Then, reduce transportation costs through enhanced truck and container use (consolidating goods and reducing the number of shipments), route optimization (adjusting routes to better move products from source to destination) and hybrid freight negotiation (contracted rates and space from diversified carriers and forwarders). Ease inventory carrying costs via full-stock visibility, allowing you to keep inventory according to demand and avoiding the need for expedited transport. Implement automation to lessen labor expenditures and consolidate and optimize operations. Consider adjusting warehouse location. And finally, explore alternate suppliers and draw from several sources for more competitive pricing.

About the Author

Nirav Patel President and CEO, Bristlecone

Nirav Patel is the president and CEO of Bristlecone, a supply chain company of Mahindra Group. He led Bristlecone’s transformation from an SAP implementer and supply chain consultancy to a global leader in helping businesses master digital transformation. Patel may be contacted at nirav.patel@bristlecone.com.

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