Page 27 - Industrial Technology EXTRA - Brexit Briefing

BREXIT BRIEFING
BREXIT BRIEFING

Hidden costs damage profits

Hidden costs can be found everywhere, including your supply chain, where they could
be seriously eroding your profit margins. KEITH KENTISH, group commercial director at
TFC, leading supplier of fasteners and supply chain solutions, highlights some unseen

supply chain costs and explains how manufacturers can avoid them
The Covid-19 pandemic has made it more reduction and rationalisation is a good way Inventory
difficult for manufacturers to source the parts to achieve this, as it means fewer orders, and While stockpiles of spare parts are a useful
they need, and a PwC poll advised that a far less paperwork. An even better approach buffer against uncertainty, they are also a
quarter of UK manufacturing management would be a vendor managed inventory (VMI) hidden cost. According to McKinsey &
were concerned about the impact of system. Company, warehouse operations cost
lockdown on the continuity of their supply companies around €300 billion each year
chains. Now, as ever, the priority for most VMI benefits include, but are not limited to, and this continues to grow as supply chains
supply chain managers is keeping technology to trigger automatic stock become more complex. Here, the three main
operations running while minimising costs, replenishments, supplier onsite stocking and costs facing manufacturers are space, labour
some of which may be hidden. consolidated invoicing. This can reduce the and equipment. Specifically, you will need to
required administration and management pay for a building to keep inventory safe,
Procurement time of c-class components. employees to move parts around and
In many supply chains, a lot of time is spent equipment to process them.
keeping track of inventory and even more is In addition, smaller companies may find it
spent making and processing the required hard to get good value without significant Understocking is even more problematic – if
orders. This issue is often exacerbated when purchasing leverage, particularly if they you don’t have the parts you need, when you
companies work with multiple suppliers change suppliers. According to a recent poll, need them, you risk having to halt
because each supplier comes with its own at least 10% of companies have changed production, and downtime is expensive.
paperwork requirements. suppliers as a result of the pandemic. Working with your VMI service partner to
understand how much inventory you will
According to a report by Zencargo, a digital The key here is relationships – maintaining need, and how often, means you can find a
freight forwarder, more than 100 million long-term partnerships with trusted balance that suits your production schedule
hours of time is wasted by UK businesses in suppliers. Smaller companies can benefit and still ensure a reduction in on-site stock
procurement, supplier management and from the leverage of a larger VMI service with the cash flow benefits this brings.
freight administration annually. This creates partner. For example, we regularly purchase
an annual cost in excess of £1.5 billion. on behalf of numerous businesses, Millions of consumers are overpaying for
consolidated demands, from our UK, their phone contracts, but let’s not let the
It would be far more valuable to reduce the European and Far East partners and can same be true of manufacturers and their
amount of administration required and move pass on the cost reduction from buying in supply chains.
staff into more productive roles. Vendor bulk to our customers. www.tfc.eu.com

INDUSTRIAL TECHNOLOGY EXTRA – WINTER 2021 27