Success in supply chains is often measured by cost reductions, but XPO Freight President Tony Brooks believes that inventory, time and working capital are far better ways to gauge supply chain success. Several shippers have voiced their agreement with this statement and expressed their frustration at the fact that transport savings is often fixated on at the expense of other vital aspects.
One important part of Brooks’ argument is that transportation is so much more than merely a cost. It contributes to the rest of the organization when it comes to proper inventory management, keeping lost sales to a minimum, and boosting supply chain efficiency in terms of not only cost but also transit times and mode.
While there is no single definitive formula for getting supply chains just right, putting creative ideas into place can be just as important as cutting costs. Focusing solely on getting the cheapest modes or providers without taking service and total financial health into consideration is a very risky approach that could lead to the loss of customer goodwill and undo all of the hard work undertaken by sales. Alternatively, ending up with a bloated inventory could render the work of warehouse managers pointless.
Jeff Berman of Logistics Management presents an interesting analogy. He suggests that finding the right formula when it comes to the success of a supply chain is like a chef trying to find the perfect recipe for a particular dish. Sometimes you might think you have it and sometimes you won’t, and you will probably have to make a lot of tweaks along the way until you find the perfect combination of ingredients to make things turn out right every time – or at least most of the time. One thing is for certain: letting one ingredient – like cutting costs – overwhelm the others is a recipe for disaster.
This blog post was based off of an article from Logistics Management. View the original here.