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When cutting supply chain cost costs you more

In Articles Supply Chain Posted March 14, 2018 at 10:13 am
By Bernadette Habkouk

Cutting supply chain cost

Finding a happy medium between price and service is the Holy Grail when it comes to most things. Cutting supply chain cost and optimising your logistics service is no exception.

Ideally, logistics partners should do more than simply move the freight.  They should be extension of your organisation, guiding your supply chain operations in line with your strategy.  In short, they should ‘have your back’. The advantages that kind of partner brings your business is invaluable.

Logistics Managers are under increasing pressure to balance cutting supply chain cost and improving value, in turn adding price pressure into the market. In this kind of environment, it is critical to ask yourself ‘What am I compromising in terms of service and value as I cut my costs?”.

In a recent article about the new provisions around Chain of Responsibility in supply chains, which will be in force as of July 1st this year.  Transport operators, depots, terminal operators, exporters, importers, customs brokers and freight forwarders all have a duty to ensure the safety of their transport activities. If you consign, pack, load or receive goods as part of your business, you could be held legally liable for breaches of the Heavy Vehicle National Law (HVNL). In addition, corporate entities, directors, partners and managers are accountable for the actions of people under their control.

This is the Chain of Responsibility (CoR).  From mid-2018, the maximum penalties for CoR breaches is up to $300,000 for an individual and $3 million for companies, plus possible prison terms of up to five years. The aim of CoR is to make sure everyone in the supply chain takes all reasonable steps to ensure that breaches of the HVNL do not occur in relation to allowable weights, vehicle dimensions, load restraint, driver fatigue, vehicle speed and maintenance.

Case Study: UK budget retail firm Poundstretcher was fined £1m because of the “chaotic” working conditions in its warehouses, which was a directly attributable to cost cutting.

With the increasing enforcement and focus on compliance around the world, it is critical you have the right partners guiding and informing you and protecting your organization.

To give the best service to your clients it is vital that you receive the best service from your partners. Benchmarking and understanding the value of an overall deal is critical. It is important you are aware of hidden costs and fully understand inclusions (and exclusions) when negotiating a deal. Things like product damage, freight loss, DIFOT performance can all have a direct impact on customer satisfaction, brand reputation and administration costs. These can be the hidden costs of a deal that may have been cheaper but skinnier in value.

The value of a logistics partner is often not apparent until something goes spectacularly wrong. It’s not until those moments when your partner demonstrates their ability to ‘walk on water’ that the value of your relationship is realised.  Successful logistics leaders understand the true value of a common goal that drives supply chain transformation, maturity and overall business success. They understand how to align partners with their business objectives.

Having partners invested in your success allows you to leverage their professional experience, delivering value directly to your business.  These kinds of partners want to learn more about your business understand your needs (and those of your customers) and deliver new ideas. In the end, those kinds of partners assist with the overall satisfaction and growth of your business.

What changes have you seen in the last few years that have truly benefited your logistics? Does your partner value transparency? Are they optimizing your supply chain? Do you feel your account manager is there for you for more than just the simple tasks?

If not, speak to us at Magellan where we know that understanding and navigating the complexities of your global supply chain is critical to your business.

For a confidential discussion about your supply chain get in touch with me today on +612 9153 0864 or via email.


Photo by rawpixel.com on Unsplash


At Magellan Logistics, we provide a variety of freight management services throughout Australia. Contact us today for more information.

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