Cost analysis in the supply chain

Today’s companies operate in a dynamic market environment, where effective supply chain cost management is critical to remaining competitive. Supply chain cost analysis allows companies to identify, evaluate and reduce costs associated with purchasing, storage, transportation and inventory management. Over coffee today, we will discuss what supply chain cost analysis is and how it can be used to optimize inventory.
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What is supply chain cost analysis?

Supply chain cost analysis is the process of identifying and evaluating all costs associated with the movement of goods from suppliers to end customers. The goal of this analysis is to understand where and why costs occur and to develop strategies to minimize them. Key elements of cost analysis include:

• Purchase costs: include the purchase price of raw materials, components and finished products.
• Transportation costs: costs associated with moving goods between different points in the supply chain.
• Storage costs: costs associated with storing goods, such as renting storage space, energy and insurance.
• Operating expenses: include employee salaries, management costs and other expenses related to the operation of the supply chain.
• Out-of-stock costs: losses due to unavailability of goods, which can lead to loss of sales and customer satisfaction.

The process of cost analysis in the supply chain

1. Identifying costs: The first step is to identify all costs associated with each stage of the supply chain. This requires a detailed analysis of financial and operational data.
2. Cost categorization: Once costs are identified, they should be categorized according to their type and the stage in the supply chain at which they arise.
3. Cost assessment: The next step is to assess the amount of costs and their impact on the overall supply chain. This analysis may include comparison with industry benchmarks and identification of costs that can potentially be reduced.
4. Cost optimization: Based on the results of the analysis, companies can develop cost optimization strategies. These can include measures such as renegotiating contracts with suppliers, optimizing transportation routes, implementing modern warehouse technologies or improving operational efficiency.

Using cost analysis to optimize inventory

1. Accurate demand forecasting: Accurate demand forecasting allows inventory levels to be better aligned with actual market needs, minimizing costs associated with excess inventory and commodity shortages.
2. Inventory level optimization: cost analysis helps determine the optimal inventory level that minimizes the total cost of warehousing and merchandise shortages.
3. Supplier management: Working with trusted suppliers and renegotiating contract terms can lead to lower purchasing and transportation costs. Integrating IT systems with suppliers enables better synchronization of deliveries and reduction of operating costs.
4. Automation technologies: Implementing automation technologies, such as warehouse management systems (WMS) and warehouse robotics, can significantly reduce operating costs and increase the efficiency of inventory management.

Summary

Supply chain cost analysis is an essential tool for companies seeking to optimize inventory management. It allows to identify and reduce costs, improve operational efficiency and increase competitiveness in the market. The use of modern technology and accurate demand forecasting methods can lead to significant savings and better customer satisfaction. In a rapidly changing business environment, cost analysis in the supply chain is key to success.

DATURE ENTERPRISE software uses artificial intelligence and machine learning in the process of demand forecasting and inventory optimization. The Dature system allows the collection of cost information in the supply chain and its application to calculate optimal inventory control parameters using a mathematical objective function with constraints. This makes it possible to ensure the required availability of goods at the lowest possible total supply chain cost.

The system provides methods for forecasting seasonal demand and demand influenced by calendar days. Inventory management methods allow for both pre-season inventory building approaches, dynamic safety stock control and JIT.

TheDATURE application ENTERPRISE can also use expertise in the demand forecasting process. Authorized users can enter expert forecasts and adjust statistical forecasts with them. The process is fully auditable in terms of who changed the forecast when and how. This makes it possible to track the accuracy of both statistical and expert forecasts. As a result, the organization learns how to forecast more accurately and improve process efficiency.