Your supply chain might be losing money without you even realizing it. Yes, it’s leaking profit! Identifying these leaks can be challenging, as they often go unnoticed amidst the day-to-day operations.
However, once you know where to look, you’ll find that these leaks are usually straightforward to fix. From inefficiencies in logistics to unexpected costs in procurement, every leak, big or small, can significantly impact your bottom line.
Thankfully, addressing these issues doesn’t have to be complex. Let’s hear from Rob O’Byrne, who can help pinpoint these leaks and provide practical solutions to plug them, ensuring your supply chain operates at its full potential.
Uncovering Profit Leaks in Your Supply Chain
Your supply chain might be leaking profits, and I’m almost certain of it. With years of experience working with various companies, ranging from $1 million to $40 billion in turnover, I’ve consistently found negative margin customer orders. This week, let’s delve into how to detect and fix these profit leaks.
Preparing for the Profit Leak Assessment
Today, I’m coming to you from a hotel room in Perth, Western Australia, where I’m currently visiting consulting clients. Despite the less-than-ideal setup, I wanted to address this crucial topic. We’ll go through a quiz together to help you identify if there’s cash leakage in your supply chain. So, grab a pen and paper, and let’s get started.
Quiz to Identify Profit Leaks
1. Do your customers’ average order values vary by only about 100%?
Most supply chains see orders ranging widely, from $100 to $10,000 or more. Answer yes, maybe, or no.
2. Do you offer a single standard service to all customers?
Think about whether your service is uniform, such as same-day delivery or three-day delivery, regardless of the customer. Answer yes, maybe, or no.
3. Are all your customers within a similar market segment?
Consider if your customers are all in the same category, like all consumers or all distribution centers. Answer yes, maybe, or no.
4. Are your products of similar size and weight?
Evaluate whether your products are consistently sized, from small items like pens to large items like ladders. Answer yes, maybe, or no.
5. Is your service offer clearly communicated and adhered to by your customers?
Ensure that customers understand and follow your service terms, such as order cut-off times for next-day delivery. Answer yes, maybe, or no.
6. Do your team members consistently follow the communicated service offer?
This question addresses internal adherence to service policies. Consider if your team is following the set guidelines without negotiating or bending rules. Answer yes, maybe, or no.
7. Do you handle any products requiring special treatment? Determine if you have items needing specific handling, such as temperature control, hazardous materials, or fragile goods. Answer yes, maybe, or no.
Watch the video to see the results and explore the rest of the quiz.
I trust that the survey has given you a sense of how effectively your business tracks customer and product profitability. These questions are part of a brief online survey we offer. Feel free to take it using this link: https://supplychainprofit.scoreapp.com/
Related articles on this topic have appeared throughout our website, check them out:
- Energy and Labour Costs: 2 Top Warehousing Challenges in 2023
- Cost to Serve Analysis—And the Costs of Neglecting It
- How to Operate Your Distribution Truck Fleet at Less Cost
- Cost to Serve – A Smarter Way to Improved Supply Chain Profitability
- Reverse Logistics Management for Supply Chain Cost Reductions
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated December 06, 2023, under the title “Is Your Supply Chain Leaking Cash?“.