Unlocking Efficiency: Achieving Bulk Supply Chain Savings and Streamlined Operations with Improved Safety Stock and Transportation
In today’s highly competitive business environment, organizations are constantly seeking ways to improve their operational efficiency and reduce costs. One effective strategy for achieving these goals is through bulk supply chain savings in operations. Bulk supply chain savings refer to the cost reductions that businesses can achieve by purchasing goods or services in large quantities. This approach can result in significant cost savings and improved efficiency across various areas of supply chain operations, including procurement, inventory management, transportation, and warehousing. In this article, we will explore some of the key ways in which businesses can achieve bulk supply chain savings and improve their bottom line.
Table of Contents
Cost savings in operations
Bulk supply chain savings in operations can be achieved through a variety of strategies, including bulk transport and safety net stock. Bulk transport involves moving large quantities of goods at once, which can result in significant cost savings per unit. Safety net stock, on the other hand, is an inventory management strategy that involves holding extra inventory as a buffer against unexpected demand fluctuations or supply chain disruptions.
Bulk transport is a popular strategy for achieving bulk supply chain savings in transportation.
By transporting goods in bulk, businesses can benefit from economies of scale and reduce transportation costs per unit. For example, instead of shipping small quantities of goods on a frequent basis, businesses can consolidate shipments and transport larger quantities less frequently. This can result in lower freight costs, reduced fuel consumption, and fewer emissions.
However, bulk transport also comes with some potential drawbacks. For example, the risk of damage or loss of goods during transportation may increase when transporting larger quantities. Businesses must also consider the impact of transportation on their carbon footprint, and work to minimize emissions and reduce environmental impact.
Another key strategy for achieving bulk supply chain savings is through safety net stock. Safety net stock involves holding extra inventory to protect against unexpected demand fluctuations or supply chain disruptions. This approach can help businesses avoid stockouts and reduce the risk of lost sales or lost customers. By having a safety net stock, businesses can also take advantage of bulk purchasing opportunities without worrying about stockouts or supply chain disruptions.
However, safety net stock comes with some potential costs. Holding extra inventory can tie up working capital and increase warehousing costs. Businesses must also carefully monitor inventory levels to avoid overstocking, which can lead to waste and increased costs.
Pros and Cons of bulk transport
Bulk supply chain savings in operations, including strategies such as bulk transport and safety net stock, offer various advantages and disadvantages. Here are some of the pros and cons of these strategies:
- Cost Savings: Transporting goods in bulk can result in significant cost savings per unit, as businesses can benefit from economies of scale and negotiate better pricing from suppliers.
- Improved Efficiency: Bulk transport can also improve supply chain efficiency by reducing transportation costs, fuel consumption, and emissions.
- Reduced Risk: Consolidating shipments can also reduce the risk of loss or damage to goods during transportation.
- Increased Risk: Transporting large quantities of goods can increase the risk of damage or loss during transportation.
- Higher Upfront Costs: Investing in equipment and resources to support bulk transport can require significant upfront investment.
- Reduced Flexibility: Bulk transport can limit flexibility in supply chain operations, as businesses must plan ahead to consolidate shipments.
Safety Net Stock:
- Reduced Risk: Holding safety net stock can help businesses mitigate the risk of stockouts or supply chain disruptions, reducing the risk of lost sales or lost customers.
- Increased Efficiency: Safety net stock can also improve supply chain efficiency by allowing businesses to take advantage of bulk purchasing opportunities without worrying about stockouts or supply chain disruptions.
- Improved Customer Service: By having safety net stock on hand, businesses can improve their ability to meet customer demand and improve customer satisfaction.
- Increased Costs: Holding extra inventory can increase warehousing costs and tie up working capital, reducing liquidity.
- Increased Risk of Obsolescence: Holding excess inventory can increase the risk of product obsolescence, resulting in additional waste and increased costs.
- Reduced Flexibility: Holding safety net stock can also limit flexibility in supply chain operations, as businesses must allocate resources to manage and maintain the extra inventory.
In this project
Our client in this scenario is looking to improve their logistics operations by reducing their transportation costs. Currently, they are spending more than the market value for transporting a tonne of cargo from location A to location B. This could be due to a variety of factors, such as inefficient transportation routes, poor negotiation with suppliers, or a lack of access to cost-effective transportation options.
To address this issue, the client wanted to explore the possibility of exporting their goods from location A rather than transporting them from their store. This approach could potentially be cheaper, as exporting from location A may offer more cost-effective transportation options, such as sea freight or air freight.
By considering this alternative approach, the client is looking to optimize their supply chain operations and reduce their transportation costs, ultimately improving their bottom line. However, before making any decisions, the client must carefully evaluate the potential benefits and drawbacks of exporting from location A versus transporting from their store. This analysis could involve assessing the total transportation costs, comparing the time and efficiency of each option, and considering any potential risks or constraints that could impact the feasibility of each approach.
1.) Export from location A vs store
In this scenario, the cost of transporting Product 2 from location A to strategic stores in location B is $X per tonne. Over a 12-month period, a total of xx,xxx tonnes of Product 2 was transported from these stores to the wharf for export, at a weighted average rate of $XX per tonne. If these tonnes were transported directly from location A to the wharf, the savings would amount to $XXX,XXX, which is the cost of transporting 11,493 tonnes to the stores and then back to the wharf.
To achieve these savings, the client can implement a strategy that involves running an extra shift for bagging at location A when loading a ship for export, similar to what is done at Yarwun. By doing so, the client can eliminate the need to transport Product 2 to the strategic stores in location B, and instead transport it directly from location A to the wharf.
2.) Bagged products sent to location c
To address this issue, the client can explore the possibility of avoiding bag shipments to location C, which would result in significant cost savings. By instead transporting bulk shipments of Product 2 to location C and only producing small bags as needed for local customers, the client can eliminate the need for costly bag shipments to the store.
The potential savings from this approach could be significant, with estimates indicating savings of around $XXXXX. However, the client must carefully evaluate the feasibility and potential impact of this strategy on their supply chain operations. They must assess factors such as the availability of bulk storage and handling equipment at location C, the capacity to produce small bags on demand, and the potential impact on service levels for local customers.
3.) Bagged products sent to bulk sites in QLD and NT
The volume of AN consumed at these sites is likely to be quite high, making the storage of AN in bags an unrealistically small safety net. As a result, the client must explore alternative strategies for maintaining a safety net while minimizing costs.
One potential solution is to switch from bagged AN to bulk AN at these sites. By doing so, the client can reduce the cost of maintaining a safety net while also simplifying their supply chain operations. Additionally, this approach can reduce the risk of safety incidents that may arise from the handling of large numbers of AN bags.
However, there are several considerations that must be taken into account when implementing this approach. These include the availability of bulk storage and handling equipment at the sites, the potential for increased transportation costs, and the need for appropriate safety protocols to manage the handling and storage of bulk AN.
4.) Load tautliners from location A vs store
The cost of hiring a forklift at the strategic store must be taken into account when evaluating the total savings achieved, which amounted to $XXXXX.
Despite this expense, the client was still able to realize significant cost savings, highlighting the effectiveness of the optimized transport strategy. By optimizing the loading and unloading processes and leveraging the capacity of tautliners, the client was able to reduce the total transportation cost per tonne and improve efficiency.
It is worth noting, however, that the cost savings achieved may vary depending on various factors, such as the distance of transport, the volume of product shipped, and the availability of suitable transport equipment. Therefore, it is crucial for businesses to regularly evaluate their supply chain operations and explore different strategies for improving efficiency and reducing costs.
Our client was able to achieve short-term savings of $Xx,xxx and long-term savings of $Yk by following our recommendations. These savings will enhance their cost efficiency and help them remain competitive in their business operations.
In conclusion, achieving bulk supply chain savings in operations can be an effective strategy for businesses to improve their operational efficiency and reduce costs. The two key strategies explored in this article, bulk transport and safety net stock, offer various advantages and disadvantages that businesses must consider when implementing them.
Bulk transport can result in significant cost savings per unit and improved supply chain efficiency, but it also comes with the risk of damage or loss of goods and requires significant upfront investment. Safety net stock can reduce the risk of stockouts or supply chain disruptions, improve efficiency, and enhance customer service, but it can also increase costs and reduce flexibility in supply chain operations.
When evaluating alternative approaches to logistics operations, such as exporting from location A instead of transporting from a store, businesses must carefully analyze the potential benefits and drawbacks. This involves assessing the total transportation costs, comparing the time and efficiency of each option, and considering any potential risks or constraints that could impact the feasibility of each approach. Ultimately, by carefully evaluating these options and implementing effective bulk supply chain savings strategies, businesses can improve their bottom line and gain a competitive advantage in the marketplace.
About the Author
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.
More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available on www.globalscgroup.com
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