3 Ways to Plug Supply Chain Revenue Leaks

Do any of these situations sound familiar?

  • The salesperson that expedites an order to overnight airfreight because a customer calls to see why it hasn’t arrived yet.
  • The supplier that isn’t being held accountable for its inability to fulfill an order on time.
  • The carrier that consistently fails to meet shipment delivery expectations.

What do all three have in common?

Each one is adding costs to their companies’ supply chains and eating up profits in an era where organizations simply can’t afford to flush money down the drain. To make matters worse, these three culprits are all either “on the inside” or acting as valuable outside partners for a firm whose supply chain is leaking revenues.

The good news is that companies don’t need to accept this lost revenue! By using technology to identify and alter inefficient internal and external behaviors, you can create major efficiencies in your supply chain.

Here are three ways to plug the leaks and ensure that you’re operating in the most cost-effective manner possible:

  1. Rein in expedited freight shipments. Yes, we know that Amazon has everyone on edge with its 2-day and same-day shipment promises, but not all deliveries need to get to their destinations within 24- to 48-hour windows. And while we’d all like our orders to arrive as we’re still punching them into our laptops or tablets, there is an actual limit to the number of orders that have to meet those timely windows. Now, in certain industries there are fines and penalties associated with delayed orders. In the automotive industry, for example, not being able to meet the constraints of a customer’s just-in-time (JIT) model could translate into hundreds of thousands of dollars in fines. This has created a “get it there as quickly as possible regardless of price” mindset among many buyers/planners that want to avoid these penalties. The problem is that expediting doesn’t always solve these problems, and no one really ever gets in trouble for expediting freight—even though it adds up to tremendous cost over time. This is where technology comes into the picture. Imagine a solution that establishes acceptable thresholds for expedite fees. If a requested shipment exceeds that threshold, a superior receives a text message on their phone to either approve or deny the request. Very quickly the companies will see a drop in unnecessary expedite fees, such as overnighting freight on a Friday when the receiving company is closed until Monday. With this kind of automated process in place, companies can realize dramatic reductions in expedite fees without impacting service to the end customer.
  2. Extend internal processes to external partners. Companies don’t operate as silos anymore, and the supply chain as a whole has become increasingly interconnected. That puts pressure on companies to not only ensure that their own processes and procedures are running smoothly, but that their suppliers are also doing their jobs. Achieving this goal across thousands (or even just a few dozen) stakeholders is a monumental task made easier with technology. So let’s say you need 120,000 widgets over a 12-month period, and without these widgets you can’t make your own goods. If you don’t get your widgets on time, you can’t produce and deliver your product on time, resulting in unhappy customers and lost revenue. To keep this kind of domino effect from impacting your bottom line, get your suppliers set up on a cloud portal. This will allow for collaboration between buyers and suppliers and provide visibility over upcoming orders and potential delays. For the sake of the above example, your supplier would commit to delivering 10,000 widgets every month on an agreed upon date. Everything is fully visible in the portal. This process keeps suppliers accountable, ensures an accurate scheduling process, and allows you to plan your own production schedule with confidence. If your supplier fails to meet an agreed upon deadline, and if your company isn’t able to deliver its own goods on time and loses revenue as a result, then the supplier should share in the loss (or, risk losing your company as a customer).
  3. Ask yourself why certain things didn’t work out as planned. When you rate your carriers, you probably look closely at key performance indicators (KPIs) like on-time delivery and total transportation costs, but the rest of the measures probably fall by the wayside. By using technology to centralize and more deeply analyze data, you can actually peel back the onion and figure out why an order didn’t arrive on time. Perhaps the data will reveal that on a regular basis a truck couldn’t pick up the freight as scheduled because the supplier didn’t have the shipment ready. Or perhaps a carrier is strong on a certain lane for up to two loads a day, but for three or more loads the on-time delivery goes down by 50%. In our recent blog post 4 Ways to Tame Big Data Overload we explain how to leverage data to not only root cause failure, but predict future patterns and plan for success accordingly. By taking these steps, your company can begin transitioning from reactive short term fixes on supply chain leaks to proactively institutionalizing behavioral changes that improve efficiency across your supply chain over the long term.

Tactical changes may work for fixing little problems across the supply chain, but for the best possible impact shippers really need to look more closely at how people are doing things and what can be done to make the process more efficient. Using technology to achieve complete supply chain visibility is a key component of this mission. By centralizing and providing visibility of supply chain information, organizations can get to the root of many of their supply chain cost run-ups, predict ways to avoid these costs in the future, start changing inefficient behavior, and ultimately lower their cost of goods.

Dan Clark, Kuebix Founder and President, is a transportation industry veteran. He possesses extensive operations and sales experience gained from years of working with the leading freight carriers. Dan founded Kuebix in 2008 with the vision of leveraging the latest cloud technology to build a transportation management system (TMS) that enabled supply chain visibility, stakeholder collaboration and predictive analytics. That vision was realized when the Kuebix team of freight and technology experts launched Kuebix TMS, a next generation SaaS TMS that is changing how businesses of all sizes purchase freight.