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THREE WAYS SUPPLY CHAINS CAN SAVE COST IN PEAK SEASON

Time: 2020-02-27

As we all know, it's a common phenomenon that most factories are understaffed to achieve on-time delivery during the holiday season.

What we need to put out is that any delay in shipping or export/importing processing will cause a huge loss in selling and the client's reputation.

Let's go over one case first:

Elena is in charge of a  LED street light project in AAA company. Maybe she is too eager to make a good impression on her superiors and meanwhile the LED project is in a rapid growth stage.

So she made a hasty desicison to cooperate with a new supplier because of the low purchasing price provided by him.

Then here comes the problem.

At the end of the December, Elena was told by the new supplier that the estimated delivery would be delayed around 15 days again.

God, this is the third delay in delivery and other suppliers have already delivered the goods half a moth ago.

That means, Elena will lose margin about $97,000, which supposed to gained from this shippment.

On my perspective, excessive focus on purchasing price will result in unstable product quality, unpunctual delivery time and extra expense to deal with sudden problems.

In fact, the total cost in the whole purchasing process includes the three parts:

1. PURCHASING COST
Expenses incurred when purchasing products

2. CHAIN COST
Expense incurred when the products move on the supply chain

3. TRANSACTION COST
Expense incurred when we need to make a deal.

Therefore, too much focus on purchasing price is like a person who works 12 or 16 hours a day, bragging about the extra time he had saved, unware he is cosuming his health.

If we want to achieve the lowset tatal cost, it is nessary to assess suppliers from multiple dimensions, such as service level, management awareness and risk tolerance, etc.

Then, since the problem of sourcing has occured, how to deal with it? In a moment of anxiety, Elena come to us asking for help.

(Since 2012, FETON has been committed to helping clients purchase LED products.

Our goal is to give clients the knowledge and tools needed to complete any lighting project with ease.

If you're looking to start a new project or renovation, our expert lighting consultants are here to assist you. )

Here are the three ways we adopt:

    1. CHECK

We asked the manufacture manager to send a video immediately showing how the producing process going on.

After learning the process of packaging, and refer to our experience we found: the original packaging process is wrong, we could make improvement from this way!

Therefore, we held a meeting with engineers to discuss and work out a new way of packaging for 4 hours, and confirmed a new process in the end.

With adoption of this new process, the packaging time has been reduced 50%.

    2. NEGOTIATE
In order to catch the Christmas sale and meet the basic demand for this model in the United States, we also assisted manufacturer to ship products in two lots.

Meanwhile, after investigation, we found the manufacture had prepared special materials that cannot be used for other products.

Due to the discovery, we was in a better bargainning position.

After 24 hours of negotiation, we successfully persuaded the manufacturer to compensate the client $18,000 for the loss and reduce the price of each item by 10% when the second batch of goods was issued.

   3.BACKUP

In order to get rid of rush period of shipping, we assisted manufacturer to book shipping spaces with two consecutive shipping line.

Therefore, even if the first shipping line over booked, we still could shift containers into the next schedule.

Eventually,  Elena promptly put this model on the floor without any loss of reputation, and obtained the total economic compensation of $30,780 from the manufacturer.

This is one of our cases that managing delivery and logistic through supply chian management. For more information, or knowing how we bring better margin to clients, please send mail to us, or follow us on Linkedin.