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For any firm that produces or moves goods, supply chain costs are a huge part of overall operating expenses. It makes them a high-priority target for cost-efficiency measures. That’s specifically true currently. With inflation, changes in global trade routes, potential tariffs, and other factors all pressuring margins. When there was the existence of covid-19, many operations leaders already took action to decrease costs along the supply chain. They were drawing back the price increase from their suppliers. Nonetheless, they are considered to be easier ways. Firms now need to make difficult and more substantial decisions about people and physical assets. But under the condition when the stakes are higher and potential mistakes are more difficult to undo. How to Begin? Our experience working with operation leaders across a vast range of industries. These industries suggest that five ways should be priorities. 1. Base the Cost Ambition on the Firm’s Expansion Point of View Those firms that are under-developed and have lower margin industries, or companies with internal unique to their organization, tend to decrease costs by uniting their footprint, closing plants, streamlining distribution networks, and rethinking processes. They also may confront severe time pressure. It forces them to apply immediate measures that bring results quickly to share their financial position. On the contrary, firms in growth position with a large array of new goods and geographical markets may relocate to expanding or innovation. They may also choose to invest in supply chain initiatives to increase functioning. These organizations can be more proactive and critical thinker. They are like this because they contain extra time to make structural improvements that have a longer implementation timeline and issue in ROI. In both scenarios, firms should initially focus on a manageable number of projects and track results over time. If we talk about our experience, firms can sometimes be excessively big in their cost ambition. However, they introduce a large number of projects and rapidly get overwhelmed by difficulty. Also, they are unable to ensure value. Rather than this, they should take a portfolio strategy, ranking potential projects by ROI. However, they stagger their implementation to catch the entire financial value of each solution. This happens before moving to the next one. It also equalizes demands across the firm. 2. Extend Transparency Via Modeling Firms can’t improve their supply chain costs until they understand them. It’s a big challenge for them given the when they have the complexities of supply chains at huge organizations. To address it, cost leaders create detailed and dynamic models that calculates costs. These costs are calculated across particular steps and processes of the supply chain. It also gives them greater visibility into costs. Also, it lets them monitor the performance more properly. Creating this kind of model is a data management challenge. Firms need to collect appropriate information across the supply chain. Combine it into an individual model that continues to make real-time data and run analytics to identify issue points. Nonetheless, such a model produces main considerations top assist operation leaders understand the firm’s cost position- and where they are able to influence or control costs. Therefore, firms can’t improve their supply chain costs until they understand those costs. Actually, modeling also allows leaders to run simulations of different situations. One example of this is a sudden increase in demand. Other examples include a reduction in supply for major inputs or the cost implications of reorganizing distribution networks to service a rapidly growing market. Analyzing current cost challenges is crucial. Nonetheless, the COOs can believe that the future will look like the current time. Situation planning can analyze how the cost structure will function under meaningful, feasible conditions. Firms can also take the support of three and five-year targets and consider making-versus-buying decisions more efficiently. For instance, a firm built a cost model with short and long-term projections. It also categorized costs as controllable, influenceable, or simply straight. Controllable costs, such as productivity rates, can be managed by procurement strategies. Static costs, such as lease payments, are considered fixed and remain over time. The firm is also creating three and five-year plans to decrease costs and manage supplier margin pressures. Also, to ensure long-term profitability. 3. Build a Cost-Aware Culture Many firms treat cost efficiency measures like a crash diet, a discrete, and troublesome event. It rearranges the organization’s priorities for a small duration. After that, everyone gets back to their old ways of working, and costs slowly crawl back. On the other hand, leading organizations approach these procedures like a healthy lifestyle. They consciously make choices as part of day-to-day work across the supply chain. However, with the whole workforce purchased in and aligned around cost metrics. A study shows that companies that align culture with cost ambitions achieve up to 11% greater long-term cost reduction. However, 62% of these “cost innovators” show positive impacts from embedding cost consciousness into the firm’s backbone. Creating a cost-aware culture like this needs firms to make a clear case for change. It happens by helping the workforce understand how cost savings fit into the overall success of the organization. Leaders and mid-level managers talk this consistently through town halls, daily team huddles, and other channels, all focused on a rational story about why the organization needs to change. They also set clear metrics and KPIS and track functioning. So that employees at every level understand what’s being asked of them and what success will seem like. Final Thoughts Supply chains account for the bulk of operating costs for different firms, making them a clear priority for cost reduction considerations. By focusing on the five considerations discussed here, companies cannot decrease costs but create a cleverer and more responsive supply chain. A supply chain, which will weaken potential disruptions and capitalize on emerging opportunities. Some firms may choose to reallocate the savings to fuel growth and innovation. At the same time, others will send them straight to the bottom without any restrictions. The common thread is the competitive benefit that cost efficiency affords.
READ FULLCompanies dealing with global shipments have always confronted this unique question-Sea freight or air freight; which is better way for my shipment? On number one, you have air freight. Famous for its fast delivery. On the contrary, we have the ocean freight. It is known for its cost-effective services and the capability to handle huge cargo weights. Both things have their own pros and cons. While opting for both the services has never been an easy task. Nonetheless, this guide will answer your question in a snap. We will compare both these cargo options on seven different parameters and assist you make a well-thought decision. Things to Look for When Considering Air Freight and Ocean Freight 1. Budget In most cases, ocean freight has always been the budget-friendly option among the two. In fact, one study shows that air freight is priced 12 to 16 times higher than ocean freight. A 100-dollar ocean shipment will cost a minimum of 1200 dollars if we ship it by air freight. Nonetheless, there is an interesting fact. The difference occurs when the total weight of your cargo is substantial. When a bundle is small and less than the weight of a whole container, we calculate its cost in cubic meters. In most cases, this can actually cost way more than air freight. But, for the same package. At last, in this regard, the credit goes to ocean freight. But the only condition is, that the package size should be small. 2. Duration of Shipment Air freight has already won the game in this regard. The duration of shipment through ocean freight is 4 to 6 weeks. On the other hand, air freight can deliver your cargo within a few days or at most a few weeks. Therefore, a comparison between air and ocean freight is impossible and useless. Three Major Pros of Air Freight 1. Because air freight is shipped by airplane. That is why it is very spacious. Therefore, it can ship all your goods in one go. Then, we have ocean freight. Ocean freight requires rail and trucks to reach their destination. 2. Unlike air freight, ocean freight has many obstacles in its way to reach its destination. Here is why it takes too much time to reach its destination. Delay in port, custom and bad weather conditions. These are the reasons of delay in shipment through ocean freight. 3. Air freights are operated on daily basis; and has multiple flights in a day. However, even if the deadline is near, there won’t be any much delay. On the other hand, if we compare it to ocean freight, it operates occasionally. Once again, the credit in this regard goes to air freight. So, the next time you plan to order any cargo, choose the air option. 3. Quantity of Cargo MSC Irina is a container ship and the largest cargo ship in the world. It has the capacity to carry 24,346 twenty-foot equivalent units of cargo. Each separate container is 20 feet long. However, it is 1,172 cubic feet in size. Now, if you do the calculation of it, isn’t it mind-boggling? Of course it is. The capacity of air freight is only a half of it. The Boeing 747 is considered to be one of the biggest aircraft in the world. The capacity of this freighter plane can hold only about 26,000 cubic feet of cargo. If you want to transport bulky or heavy cargo, choose ocean freight. The same thing goes to large-scale shipments. However, if you want to send perishable goods, then no other way than air freight would be better. However, again, we have a winner regarding this topic: air freight. 4. Environmental Impact The difference between air freight and ocean freight is simple. Fuel consumption, emissions, and overall sustainability are the differences between air freight and ocean freight. Let’s compare air freight to ocean freight. Ocean freights consist of lower carbon footprint per ton of cargo transported. Here are some numbers as proof- • The average number of flights emits 500 grams of carbon dioxide. • Ships exude only between 10 and 40 grams of carbon dioxide per kilometer. Also, new regulations around the carbon emissions of ships were applied last year in January. According to these regulations, both new and old ships have to necessarily decrease or purchase balanced carbon credits to offset their carbon emissions. This means ships’ carbon emissions are going to decrease even more. This also makes them economical than ever. Therefore, if you are an entrepreneur who wants to keep things eco-friendly, you have the answer to your question now. However, this time, the winner in this regard is ocean freight. 5. Cargo Safety Here come a few factors that don’t have a particular winner. Ultimately, it depends on the condition and nature of your cargo. It also depends on safely loading and unloading your cargo. One study suggests that ocean freight has an extreme risk of theft or damage of cargo before it reaches its destination. It depends on the factor that first, it has to go through the hands of many handlers. If we compare it to air freight, it is a better and safer way. In air freight, the cargo is handled carefully. Thus, the risk of damaged cargo drops. Also, the chances of theft are low. For small, valuable cargo, air freight is the optimal option. Another study suggests that ocean freight is also a good option for cargo safety. After all, cargo is properly packed into typical containers. This happens before loading them into the ships. Thes containers securely transport the goods this way. Or you can say that, ocean freight is a better option of transporting your cargo if it is fragile. Certainly, the credit in this regard goes to both the freights. Why? Because each one freight option is optimal in their own nature. Wrap Up As you just saw, that we can’t compare air freight and ocean freight to each other. Each type of freight is unique and best in its own way. It all depends on the nature of the cargo and other scenarios. However, no matter which freight you go for, each one has their own complexities. You have to stay active on the updates and make data-driven decisions according to that. Certainly, this is where Freighify become a game-changer.
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