Improving Business Profitability By Reducing Supply Chain Costs

Between 2015 and 2021, Nigerian businesses paid foreign shipping lines an estimated N28.8 trillion (US$60 billion) in freight. The sharp increase in shipping charges last year contributed to this figure, and it massively impacted many small businesses’ profitability. In an environment with strong competition and economic uncertainty, this is a major knock. It’s also highlighted how reducing supply chain costs can improve profitability. But there’s more to this than finding cheaper freightage. You should consider every aspect of the process of fulfilling orders too.

Reduce The Packaging Of Your Products

According to Chron, product packaging can affect the amount of money your business spends on transport. If your products are packaged in excessive packaging, fewer items can be packed per box, which in turn affects the number of boxes per freight container. Assess your product packaging, and if you can reduce it, do it. The more products you can fit in one box, the fewer freight containers you’ll need. This can reduce your shipping costs.

Use Transport Modes

Your SME isn’t Amazon, so don’t try to compete with the retail giant. Not all your products need to be shipped overnight. Many of your customers will understand that shipping delays are inevitable, especially if you let them know in advance. Choose faster shipping options for high-demand products, and more affordable, slower options for products with lower demand.

Another approach is to opt for more expensive full truckload (FTL) shipping for large, heavy deliveries that require fast delivery. For smaller deliveries that don’t need to arrive as soon as possible, you can opt for less-than-truckload (LTL) shipping

Choose Different Carriers

Last year, the Conversation reported that Nigeria’s transport network faces several challenges. Amongst these was a lack of adequate cargo handling equipment at some ports, and accidents and breakdowns caused by roads in poor conditions. Another challenge is the lack of rail connectivity, but that is set to change as the government continues to invest in railways. The technological developments in the sector could result in good news for freight and local businesses, especially as the use of automation increases. Technology is vastly improving rail freight and it could well be the preferred choice for the future.

Looking at the present, relying on a single carrier could result in missing out on options that are more competitively priced. The situation could also result in severe delays, or worse, if the only carrier you use goes out of business unexpectedly. Having more than one carrier as a shipping option gives you more control over your supply chain. Plus, it makes it easier to reduce the costs involved and increase your business’s profitability.

Use Sales Planning To Predict Demand

Without proper sales planning to help you predict demand for various products, you risk overstocking items that few, if any customers, want. According to Shopify, this can use up resources and time, which can affect your profitability and productivity.

To mitigate this, use sales planning to forecast customer demand for specific products. While not an exact science, this can help you to ensure that you have high-demand products in stock, and that you don’t waste money overstocking products for which there isn’t high demand.

By taking every aspect of your supply chain into account, you can reduce costs in various ways and increase your business’s profitability.

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