Attention Manufacturers and Distributors: How to Save Dollars through Data Automation
When trying to reduce costs, manufacturers and distributors often find that there is no one-size-fits-all solution. In order to successfully reduce costs, you must create a strategy based on several economic and infrastructural factors, including the industry, location, and business model of the company. Even when the economy is in full bloom, some industries struggle to keep their costs low despite surging revenues. There are several ways in which these issues arise and create an ongoing concern for manufacturers and distributors. This blog touches on some key problems that companies face when trying to keep costs low and highlights how data automation can help offset these concerns.
Forgetting your lean roots
As much as implementing an ERP system boosts the efficiency of your company, if you’re still spending massive amounts of money on overhead, you’re doing something wrong. For example, with an ERP system, a manufacturer can process a larger number of purchase orders, thereby decreasing the processing cost per order. That might sound good, but if you consider the percentage of overhead spent on each order to manage all of this paperwork, you could actually be spending more money than before. According to lean principles, purchasing and procurement are considered overhead, and they don’t add value unless used as a competitive advantage. It’s important to not forget about your lean roots—and to find solutions to these non-value adding areas.
Giving into the pressure
Without an ERP system that enhances the visibility of the procurement process from beginning to end, it can be difficult to make sound business decisions. Have you ever rushed a purchase order because you’re not 100% sure of how much inventory is on hand or how much it costs to ship the order? What about when you’re pressured to expedite an order just because of lack of visibility? These types of situations are dangerous because they take away the ability to search for the best product costs, add unnecessary freight costs, and can result in missed volume discounts.
Analyzing freight costs as a single summarized value
This is a definite no-no. By doing this, you don’t know what percentage of transportation costs is associated with normal orders versus expedited orders. If you have a good handle on this information, you are better able to find new ways to reduce waste. This results in confusion about how to reduce costs and a lack of visibility. Without visibility, you cannot accurately analyze the most efficient methods of reducing these costs up front.
Fortunately, there are four data collection areas that are ripe for automation that may help offset these expenses. To learn more information about these key solutions to wasting dollars, check out our latest tip sheet, 4 Ways to Reduce Costs Using Automated Data Capture.