Supply chain cost reduction: How to achieve it?

Today's challenges in supply chain cost reduction

Achieving supply chain cost reduction means being able to overcome the current challenges that hinder the operational efficiency of processes. We are talking, for example, about the lack of a complete and comprehensive view of processes, something that makes it extremely difficult to identify any inefficiency, error or opportunity to reduce costs.

Cohesion between the different teams and areas of activity is another challenge that hinders coordination and planning, leading to extra expenses due to factors such as delays, higher storage and obsolescence costs, or surpluses or shortages of stock. Similarly, it happens with suppliers, where poor communication and collaboration can incur errors and additional costs.

Finally, another of the most prominent challenges has to do with adaptability. We are in a business environment where changes happen at breakneck speed. Therefore, not being able to adapt quickly to changes in demand, prices or market conditions can incur a considerable increase in expenses and, therefore, a greater difficulty in reducing costs.

Digitalisation is postulated as the way to address these challenges and reduce costs in the supply chain. However, which digital solutions are currently the most effective? Without a doubt, the ERP. Here's why.

Supply chain cost reduction thanks to ERP

If you want a significant supply chain cost reduction, ERP is the ideal solution. Although these are systems with all kinds of functionalities for business management, today we will focus only on cost reduction. ERP achieves supply chain optimization through process integration, task automation, data analysis, and real-time process visualization capabilities.

However, not all ERPs are suitable, and we need one that can address the aforementioned challenges. Therefore, we are going to talk about SAP Business One, the leading ERP in SMEs, and how it can help us in the task of reducing supply chain costs.

SAP Business One for supply chain cost reduction

Below, we will take a closer look at the capabilities of SAP Business One for supply chain management and how they directly impact costs.

Inventory and warehouse management

SAP Business One enables comprehensive inventory and warehouse management. It provides traceability of every process that makes up the supply chain, providing the opportunity for accurate tracking. This tracking reduces costs associated with storing surplus products and minimizes obsolescence losses with proper inventory turnover.

In addition, SAP Business One contributes to cost reduction through tools that efficiently manage space and minimize the need for warehouse expansions.

Production planning and control

The supply chain visibility and performance metrics that the software provides help implement procurement strategies called JIT (Just-in-Time Production). In this way, costs derived from surpluses and storage are reduced, while reducing the waste generated and optimizing resources. By aligning production with demand, we also ensure the reduction of downtime and its associated costs.

Optimisation of transport and logistics

Logistics management with SAP Business One also has a positive impact on supply chain cost reduction. For example, route optimization greatly minimizes transportation costs. Another example is shipment consolidation, where we can reduce the number of trips required as much as possible and therefore transport costs as well.

Supplier relationship management and automated purchasing

SAP Business One also enables a significant supply chain cost reduction through efficient management of purchases and suppliers.

Firstly, the system ensures that the necessary product quantities are shipped in a way that optimizes both transportation and inventory space. Additionally, we can review supplier prices to ensure they remain competitive.

Secondly, the automated purchasing system reduces costs associated with the resources previously used for these tasks, as well as being more precise and reducing human error.

It is worth highlighting that the data analysis capabilities provide companies with the ability to continuously detect improvement opportunities, maximizing supply chain cost reduction without compromising the quality of the service offered.

Demand analysis and forecasting

SAP Business One collects information from all points in the supply chain and performs comprehensive data analysis, including cost analysis. Through the different performance metrics that we can customize according to our needs, savings opportunities can be detected at all times and decisions can be made based on objective information on the current state of the business. This has a direct impact on improved decision-making that optimizes costs.

With regard to demand forecasting, based on the analysis of historical data, the reduction of supply chain costs is achieved thanks to the ability to anticipate future needs and have optimal stock at all times, thus avoiding stockouts.

Integration with other business tools

Finally, we'll discuss SAP Business One's ability to integrate with third-party applications. How can this contribute to supply chain cost reduction?

Integrating all tools on a single platform allows for streamlined workflows. As with interdepartmental cohesion, unifying tools into one solution reduces cycle times and operational costs. In addition, it allows data to be cross-referenced to obtain valuable knowledge that can be used to reduce costs as well.

Reduce your supply chain costs with SEIDOR

At SEIDOR, we have been offering digital solutions for more than 40 years. We have implemented hundreds of solutions that have enabled our customers to significantly reduce supply chain costs. If you want your company to be one of them, contact us.