Transforming Manufacturing and Supply Chain Operations: Achieving 23% Reduction in Cost per Tonne through Optimisation
Manufacturing optimization in freight is an essential process for companies seeking to improve their supply chain operations. The efficient movement of goods is critical to reducing costs, increasing capacity, and improving delivery times. To achieve this, businesses need to optimize transportation, inventory, warehouse, and supplier management processes. The use of technology, data analysis, and process improvement techniques is essential to creating a more efficient and sustainable supply chain. In this article, we will explore the key areas of focus for manufacturing optimization in freight and the benefits that businesses can expect to achieve from implementing such programs.
Table of Contents
Freight manufacturing optimization
Freight manufacturing optimization is the process of improving the efficiency of freight transportation and distribution systems. It involves the use of technology, data analysis, and process improvement techniques to reduce costs, increase capacity, and improve delivery times. The goal is to create a more efficient supply chain that can better meet customer demand while minimizing waste and reducing environmental impact.
Manufacturing optimization in freight involves several key areas of focus:
- Transportation Management: The efficient movement of goods is a critical component of any freight optimization program. This involves selecting the right transportation mode (air, sea, rail, or truck), optimizing routes and schedules, and minimizing empty miles. The use of technology such as GPS tracking, real-time traffic data, and route optimization software can help to streamline this process and reduce costs.
- Inventory Management: Efficient inventory management is essential to reducing costs and improving delivery times. This involves optimizing inventory levels, reducing stockouts, and minimizing the cost of storing and transporting goods. The use of predictive analytics and machine learning algorithms can help to improve inventory forecasting and reduce waste.
- Warehouse Management: The efficient management of warehouses is critical to ensuring that goods are stored and transported in the most efficient manner possible. This involves optimizing warehouse layout, reducing product handling, and minimizing the time required to pick and pack orders. The use of automation technology such as robotics, conveyor systems, and automated storage and retrieval systems can help to reduce costs and improve efficiency.
- Supplier Management: The efficient management of suppliers is essential to ensuring that goods are delivered on time and at the right cost. This involves selecting the right suppliers, negotiating favorable terms, and optimizing the ordering and delivery process. The use of supplier portals, real-time tracking, and automated ordering systems can help to streamline this process and reduce costs.
- Sustainability: Freight manufacturing optimization also involves reducing the environmental impact of transportation and distribution systems. This can be achieved through the use of alternative fuels, reducing empty miles, optimizing transportation routes, and reducing packaging waste.
Saving freight using combination of Sea, Air and Land transportation
Each mode of transportation has its own advantages and disadvantages, and choosing the right mode for each shipment can help businesses save on freight costs.
Air transportation is the fastest mode of transportation and is ideal for shipping time-sensitive and high-value goods. While air transportation can be more expensive than other modes, it can save businesses money by reducing inventory costs and increasing the speed of delivery. However, air transportation is limited by weight and volume restrictions, so it may not be suitable for shipping large or bulky items.
Sea transportation is a cost-effective mode of transportation that is ideal for shipping large volumes of goods over long distances. While sea transportation is slower than air transportation, it is less expensive and more environmentally friendly. Sea transportation is also suitable for shipping oversized and heavy goods that cannot be shipped by air or land.
Land transportation is ideal for shipping goods within a region or country. It is a cost-effective mode of transportation and is often faster than sea transportation. Land transportation is also flexible, as it can be used to transport goods to remote locations that are not accessible by sea or air. However, land transportation is limited by infrastructure and can be affected by traffic congestion and other factors.
To save on freight costs, businesses can use a combination of these transportation modes to optimize their shipments. For example, businesses can use air transportation for time-sensitive shipments, sea transportation for large volumes of goods, and land transportation for regional shipments. By using a combination of transportation modes, businesses can reduce their freight costs and improve their delivery times.
Another way to save on freight costs is to consolidate shipments. By consolidating shipments, businesses can reduce the number of shipments and save on transportation costs. For example, instead of shipping multiple small shipments, businesses can consolidate them into a single larger shipment. This can save on transportation costs and reduce the carbon footprint of shipping.
Negotiating shipping rates is another way businesses can save on freight costs. By negotiating with transportation providers, businesses can secure better rates and save on transportation costs. This can involve negotiating volume discounts or long-term contracts with transportation providers.
In this project
In order to optimize their overhead costs by improving their supply chain, our client provided us with a breakdown of their manufacturing process. Our task was to identify areas of improvement in their operations. We collected data from both their B2B and B2C divisions over a period of 20 months, and based on this analysis, we developed a series of recommendations that will help optimize their operations.
Reducing freight cost per tonne
Reducing freight cost per tonne using a combination of different modes of transport such as air, sea, and land can be achieved by following these steps:
- Analyze the Current Freight Transportation Model: The first step is to analyze the current freight transportation model to identify areas of inefficiency and cost-saving opportunities. This involves assessing the current transportation modes used, transit times, shipping routes, and shipping frequency.
- Identify Cost-Saving Opportunities: After analyzing the current freight transportation model, identify cost-saving opportunities by exploring alternative transportation modes, routes, and frequency. For instance, it may be cheaper to transport goods by sea rather than air, or to consolidate shipments to reduce the frequency of shipments.
- Optimize Transportation Modes: Based on the identified cost-saving opportunities, optimize transportation modes to reduce freight costs. This may involve using a combination of different modes of transport such as air, sea, and land to optimize transit times and reduce costs.
- Utilize Intermodal Transport: Intermodal transport involves using different modes of transport such as sea, air, and land to move freight. By utilizing intermodal transport, businesses can reduce costs by selecting the most cost-effective mode of transport for each shipment.
- Consolidate Shipments: Another way to reduce freight costs is to consolidate shipments. This involves grouping shipments to reduce the frequency of shipments, which can reduce costs associated with transport and handling.
- Optimize Transit Times: Optimizing transit times involves selecting the most direct and efficient shipping routes, reducing transit times, and avoiding unnecessary shipping delays. This can reduce costs associated with transportation, storage, and handling.
Negotiate Shipping Rates: Finally, negotiate shipping rates with carriers to reduce freight costs. This involves comparing rates from different carriers and negotiating favorable terms based on shipping volume, frequency, and transit times
- The potential ex-Works cost per tonne is $XXX or 23% lower than the current equivalent costs
Implementing technology and automation is also critical to achieving manufacturing optimization and supply chain management. By using technologies such as robotics, artificial intelligence, and the internet of things (IoT), businesses can automate repetitive tasks, reduce errors, and improve efficiency. For example, using automated warehouse management systems can help businesses optimize inventory levels and reduce storage costs.
Finally, reducing freight costs through a combination of different modes of transport such as air, sea, and land is another way businesses can achieve manufacturing optimization and supply chain management. By analysing their freight transportation model, identifying cost-saving opportunities, optimizing transportation modes, consolidating shipments, and negotiating shipping rates, businesses can reduce their freight costs and improve their bottom line.
In conclusion, manufacturing optimization and supply chain management are critical for businesses to remain successful and competitive in today’s market. By defining and measuring KPIs, analysing existing processes, implementing technology and automation, and reducing freight costs, businesses can optimize their operations, reduce costs, and improve customer satisfaction. Companies that prioritize manufacturing optimization and supply chain management will be better positioned to succeed in today’s competitive business environment.
Vivek Sood: Sydney based managing director of Global Supply Chain Group, a strategy consultancy specializing in supply chains. More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available www.globalscgroup.com
Vivek is the Managing Director of Global Supply Chain Group, a boutique strategy consulting firm specialising in Supply Chain Strategies, and headquartered in Sydney, Australia . He has over 24 years of experience in strategic transformations and operational excellence within global supply chains. Prior to co-founding Global Supply Chain Group in January 2000, Vivek was a management consultant with top-tier strategy consulting firm Booz Allen & Hamilton.
Vivek provides strategic operations and supply chain advice to boards and senior management of global corporations, private equity groups and other stakeholders in a range of industries including FMCG, food, shipping, logistics, manufacturing, chemicals, mining, agribusiness, construction materials, explosives, airlines and electricity utilities.
Vivek has served world-wide corporations in nearly 500 small and large projects on all continents with a variety of clients in many different industries. Most of projects have involved diagnostic, conceptualisation and transformation of supply chains – releasing significant amount of value for the business. His project work in supply chain management has added cumulative value in excess of $500M incorporating projects in major supply chain infrastructure investment decisions, profitable growth driven by global supply chain realignment, supply chain systems, negotiations and all other aspects of global supply chains.
Vivek has written a number of path breaking articles and commentaries that are published in several respected journals and magazines. Vivek has spoken at several supply chain conference, forums and workshops in various parts of the world. He has also conducted several strategic workshops on various aspects of supply chain management. He received his MBA with Distinction from the Australian Graduate School of Management in 1996 and prior to these studies spent 11 years in the Merchant Navy, rising from a Cadet to Master Mariner.
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