The cost of business

John Lisowski

The recession has forced many companies to take a hard look at ways to save money as sales continue to decline or remain stagnant. One place to look at cutting costs is in supply chain processes, which consist of materials and information exchanges.

The supply chain looks at everything from the acquisition of raw materials to delivery of finished goods and purchase by or delivery to end users. All vendors, service providers and customers are links in the supply chain.

The supply chain is made up of several elements, but there are core factors, including network optimization and transportation, that help reduce the cost of goods sold.

“You can run the risk of not minimizing your costs to produce products by not analyzing your supply chain,” says John M. Lisowski, the industrial brokerage manager of the Global Supply Chain Solutions Group at Grant Street Associates, Inc. “This will then decrease your overall profitability.”

Smart Business spoke with Lisowski about how to analyze your supply chain and ways to cut costs.

What is the most strategic aspect of a supply chain, and how does it work?

The most strategic aspect is network optimization. Supply chain effectiveness relies on the ease with which goods and information flow from suppliers to production to distribution to the end customers. In the past, real estate location was not viewed as an important factor in optimizing your network strategy, but it does play an integral role in an effective network. The easier it is to transfer goods from one process to another, the greater the opportunity to save time and money. Real estate involves anything from the location of the supplier, the production facility, the distribution center or the end user. Any of these locations plays an important role in the network’s overall efficiency.

You can identify effectiveness by closely analyzing the flow of goods and information through the process. This is done through an in-depth analysis or study by unbiased, third-party, trained professional consultants. Depending on what you consider to be an integral part of your infrastructure, you may want to do a network optimization analysis. This takes a look at the entire supply chain, including suppliers, real estate, shippers and customers. It will also review all aspects of the network to see if efficiency is at its peak or if corrective measures need to be taken.