How To Reduce Supply Chain Costs


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The most effective way to reduce supply chain costs is to collaborate with your suppliers. This helps not just reduce supply chain costs, but also assists in expanding your business to other locations. Apart from supply chain collaborations, other ways to reduce the supply chain costs include, using better communication tools and sophisticated software. Let us discuss about both the methods.

Effective Supplier Collaboration; Collaborating with your suppliers means that there must be free access to information regarding the stages of supply chain planning. You and your supplier must aim for making the customer come back, by providing him/her with the best possible service.

Here are some ways to make supplier collaboration work for you:
1) Shift from Advance Shipping Notice reception to facility flow through.
2) Customize the technology that you use to fit in better with the model your supplier uses. This will help in better communication.
3) Chart out a plan with your supplier that will forecast customer demand and provide information about inventory.
4) Negotiate division of work, so that jobs like labeling items will be done by the suppliers.

Communications Standards; Using the latest communication tools can increase the efficiency of the interaction between the supplier and yourself. The latest communication tools help you in not just verbal communication, but also in exchanging documents, sending emails etc.

One of the latest communication standards in use for supplier collaboration is the AS2. The AS2 is a mechanism that helps in communications transport.

AS2 Basics
1) If you plan to use the AS2, you also need AS2 software module, EDI transformation engine, web server. The AS2 can also be used in conjunction with VAN. This helps in slowly replacing the VAN with AS2 system.
2) AS2 is ideal for horizontal application over supply chains.

Advantages of Using AS2; AS2 holds immense possibilities for those who wish to interact better with their suppliers. Some of the advantages of using the AS2 communication system are detailed below.

1) Cost Effective
The AS2 can be deployed on the Internet, reducing installation charges. 2) Data Exchange
The speed of exchanging information using AS2 is phenomenal. In fact, the real time data transfers are an effective way of passing documents to your suppliers.
3) Network Formation
Since the AS2 is highly affordable, you can have all your partners and collaborators install the system and work as a network.
4) Reduced Errors The possibility of human error is reduced, since AS2 is easy to use, and does not need extensive technical know how.

Use of sophisticated communication tools and software like AS2 helps integrate your business to the needs of the supplier, thus making both parties collaborate. This ensures reduction in supply chain costs. If you need help in reducing supply chain costs in your small business, you can approach a small business consultant for help.

Alexander Gordon is a writer for - The Small Business Consulting Community. Sign-up for the free success steps newsletter and get our booklet valued at $24.95 for free as a special bonus. The newsletter provides daily strategies on starting and significantly growing a business.

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