Key factors for an effective supply chain
Key factors for an effective supply chain
Every day, businesses lose money - without even realising it. It’s not because of poor sales or high rent. It’s because of what’s happening behind the scenes: they’ve purchased the wrong stock, set up their warehouse in the wrong place, made mistakes with the data, or had a supplier let them down. In this article, with the help of experts from Selpway Trading, we’ll look at exactly where your business is losing money on logistics and how to put this right.
The supply chain consists of specific links: procurement, warehouses, transport, stock and data. If one link fails, the chain begins to break down. For example, if the wrong items are procured, the warehouse becomes overcrowded. If a mistake is made in the warehouse, the customer receives the wrong goods. It is vital that all stages are linked via IT systems. If you do not have accurate data, you are making decisions at a guess.
What elements make up the logistics chain?
Many people think: it is better to buy more to avoid shortages. In reality, you are simply tying up money in the warehouse. According to research, companies worldwide hold over $1 trillion in excess stock. This money could be generating a profit, but it’s simply sitting there, note the experts at Selpway Cyprus. Add to this the costs: warehouse rent, insurance, taxes and spoilage. As a result, every year you lose up to 20–30 per cent of the value of this stock. The upside is that you have the goods. But there is a huge downside - you are losing working capital.
Why excess stock is money tied up
The location of a warehouse has a direct impact on costs, according to SELPWAY managers. If it is far from customers, you pay more for delivery and waste time. If you have too many warehouses, you end up paying too much for rent, staff and maintenance. Finding the right location will reduce costs and speed up delivery.
How warehouse location affects costs
Example: your system shows that there are 20 pairs of trainers in stock. A customer places an order. But in reality, the trainers aren’t there - the data is out of date, and someone forgot to update it. As a result, you’ve sold goods that don’t exist. The customer is angry, you issue a refund, and your reputation suffers.
Such data errors reduce retailers’ revenue by up to 9 per cent a year. This is precisely why automated accounting programmes - ERP (Enterprise Resource Planning) and WMS (Warehouse Management System) - are needed, so that you can see the real picture, rather than data entered by someone a month ago.
Such data errors reduce retailers’ revenue by up to 9 per cent a year. This is precisely why automated accounting programmes - ERP (Enterprise Resource Planning) and WMS (Warehouse Management System) - are needed, so that you can see the real picture, rather than data entered by someone a month ago.
The Cost of Data Errors
Let’s say you’re a custom cake maker and you have just one flour supplier. If they experience supply disruptions, you lose customers and money. The same applies to any business. If a supplier delays a delivery or sends defective goods, you end up in the red. According to research, 85 per cent of business problems are caused by suppliers. Experts at Selpway Trading emphasise that having just one supplier is always a huge risk.
How the choice of suppliers affects your income
Step 1. Set up a proper accounting system - even if it’s just a simple programme - to ensure you have accurate, up-to-date data.
Step 2. Define who is responsible for what - there must be a specific person in charge of each task.
Step 3. Next, look at your stock levels, suppliers, warehouse locations and delivery arrangements.
It’s not a quick process, but it’s effective. Businesses that have started with these simple steps see completely different figures after a year or a year and a half – both in terms of costs and profits.
Step 2. Define who is responsible for what - there must be a specific person in charge of each task.
Step 3. Next, look at your stock levels, suppliers, warehouse locations and delivery arrangements.
It’s not a quick process, but it’s effective. Businesses that have started with these simple steps see completely different figures after a year or a year and a half – both in terms of costs and profits.