Component Cost: How Much is Your Component Really Costing You?

The supply chain is the process of making and selling goods. This chain starts when you receive an order, and includes every single stage of the process, up until the customer gets the product that they have ordered. If you are going to have a successful company, then you are going to need to manage the supply chain well. Any company that is hoping to stay competitive will need to consider their supply chain consistently, ensuring that it is as effective as possible at any given time.

However, there are some parts of the supply chain that are high in cost, and you need to make sure that you are doing everything in your power to avoid paying too much. Down below, we’re going to be looking at some of the components of the supply chain that are costing your business too much money.

 

Transportation

The first thing that we are going to mention is transportation costs. The reason that transportation can be so high is that you may have not planned accordingly for your supply chain network. As such, leaving you to adapt at the last minute and find transport for your finished goods, as well as for your raw materials which can be a nightmare and cost you money that you might not have. As such, you are going to need to reduce your transportation costs.

One of the ways that you can do this is to make sure that your supply chain network is designed in such a way that the location of suppliers, manufacturers, distributors and your customers is the best it possibly can be. You should also make sure that the routes and the mode of transport that you use are the best for your business’ needs. If not, then maybe rethink your overall transportation which may result in it being cheaper, and suits your overall business plan better.

 

Procurement Costs

You need to make sure that you are choosing the right suppliers. These are going to be the ones that aren’t letting you down on a consistent basis, and are always delivering you the right products and materials. You don’t want to choose a supplier that is constantly giving you incorrect orders and things that you don’t actually need. As well as this, the right supplier will be giving you the lowest possible price so that you aren’t spending any extra money that isn’t necessary.

When it comes to choosing a supplier, you want to use information and data from real life, including that of other customers, and then comparing the performance and prices of various suppliers. You want to make sure then that you are choosing the supplier that is consistently reliable, rather than one who is often making mistakes.

 

Production Costs

Production costs will always vary, but you need to make sure that you are always comparing companies to get the best possible price. Changes in production costs can be down to a number of things such as ineffective workforce management, manufacturing overhead costs for items changing, reworking and so much more. It’s for this reason that you need to manage your production line carefully, ensuring that you are keeping on top of any changes that happen down the line.

In order to turn this into one of the low-cost components, rather than a high cost one, you are going to need to make some changes to the way that you are running things ASAP.

 

Insourcing

While most companies opt to outsource their manufacturing of components, insourcing could be the solution you didn’t know you needed. Instead of using all outside companies to complete the process, you can assign the project to a person or department within your own business. If you insource components, this is going to make everything that much cheaper, as you are keeping it within the business, rather than hiring, and attempting to maintain a relationship with various different companies. Also, sourcing materials or production of components within the UK will not only save lead times but will ultimately save on the overall component cost. Sourcing overseas is becoming a costly routine for many companies.

The manufacturing supply chain can be a long one, and you want to be certain that it is costing you as little as possible. Your business can’t afford to lose more money because there are components of the supply chain that are being effectively managed, or because nothing is coordinated, leaving it down to you to solve at the last possible second between companies.

 

Conclusion

How does paying for overseas services affect your bottom line? Find out how a UK-based partner could save you money by reading our helpful guide.