The many effects of the Coronavirus continue to change on a daily basis. While reports of new cases in China have been declining, (and that is certainly good news), that is not the case in many other countries, including the United States.
Every country around the globe that has been affected, or could be affected by the Coronavirus is instituting a full court press in an effort to not only contain the spread of the virus, but to ensure the safety of their citizens as well as its economy.
Looking at the business side of this crisis, Global Supply Chains must now address the elephant in the room. And, what is that elephant in the room? Can companies that rely solely on China, or any other foreign nation for that matter for their businesses life support, continue to do so in the future?
Several years ago, there was an awful lot of noise about the need for companies to begin re-shoring efforts and bring manufacturing back to the United States. And, what wonderful benefits that would be for the US workforce and therefore for the US economy. If only it were that simple!
Simple or not, the best time for companies to take a hard look at their global supply chains to protect them from future global disruptions is between yesterday and tomorrow. Yes, that’s right, today is the day to act!
And, let’s be honest here, simply moving our suppliers and/or manufacturing from foreign countries to US suppliers and manufacturers does not by itself guarantee there will no longer be any supply disruptions.
But what companies must do, if they haven’t already done so, is analyze how they can make their supply chains more flexible, giving them immediate options to shift suppliers and/or manufacturing, if and when necessary. Having said that, no one is saying it will be an easy task to achieve, but it certainly is one that must be analyzed.
Another area global supply chains must look at now is where can a company achieve reductions in operating costs to help offset the loss of revenue companies will definitely experience. Remember, operational cost reductions immediately fall to a company’s bottom line and therefore will have a positive impact in helping offset the loss of revenue from declining sales.
Transportation and logistics expense are an area a company must continually look into to see if they are leaving any money on the table. This is never a one and done process and should be looked at continually throughout the year, every year. Here are some cost reduction areas a company should be continually evaluating.
Comprehensive Invoice Audit Processes
All companies must ensure they have a comprehensive freight invoice audit processes in place. These processes should include an invoice pre-audit process, where invoices are audited prior to payment. This can be done of course in-house or through the services of a Third Party invoice audit firm.
Whether a company audits their invoices internally, or outsources that function it should always engage a post-audit firm that will “audit the auditor.” In other words audit the invoices after they have been audited the first time.
A comprehensive pre and post audit process can yield savings of 2-5% of a company’s annual freight expense, so this can have a significant positive impact on the corporate bottom line.
Comprehensive Freight Cost Benchmarking Services
All companies negotiate with their transportation and logistics service providers usually on an annual basis. But very often the rates they receive are the rates the service provider believes the shipper will be happy with. Being happy and ensuring your company has the most competitive rates for the services being offered are two separate and distinct things.
Without an independent third party benchmark analysis no company can ever be completely assured they will pay the most competitive rates with each and every one of their transportation and logistics service providers for the services actually provided.
The financial impact on a company’s bottom line by having their rates benchmarked by an independent third party can yield enormous savings in excess of 10-40% of a company’s annual shipping expenses. These independent third parties are not necessarily better negotiator. They will ensure however their clients will now be able to negotiate from a position of strength based on providing the comprehensive analytics necessary to ensure “the best deal.”
So, the big question global supply chains must answer today is, is your company doing everything it can to soften the financial blow of the current Coronavirus outbreak? If not, you’re company is definitely leaving money on the table. Call us today and speak with one of our logistics experts and we will help you “find the money you never knew was missing!”
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