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Supply Chain Cost – Strength or Weakness?

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Herons Logistics

By Mr. Rajesh Mehta

While we love/(enjoy) a good bargain & have developed an appetite to save cost whenever an opportunity presents itself. Though it is important to negotiate for low cost it is not advisable to do so without proper comprehension of the values of goods or services that have been purchased.

A recent survey held showed that two of the 4 main reasons for business failure was cited one as “Poor Supply Chain (SC) strategy” and second as “non-collaborative partnership with critical suppliers”.

It’s crucial to understand that the supply chain is all about services and services are a matter of choice. It is important to note that during Covid, the most structured & planned supply chain strategies have also derailed causing businesses huge losses in production &sales. To sustain in such a scenario, many paid 2-3 times of the budgeted logistics cost just to keep up and running. COVID has exposed this huge flaw and highlighted the need to have the correct approach while designing of Supply Chain.

Collaborative Supply Chain partnership is the way forward.

In the contemporary VUCA world, where trade is facing a situation of unjustified inflated rates charged by profiteering shipping cartels, the bureaucracy of regulatory bodies, lack of infrastructure which are making it difficult to meet customers’ high/(lofty) expectations of constant push for the low cost. In such a situation, the first& foremost is to make use of experienced resources to stabilize and generate consistency on your commitment and then strategize the supply chain to be more sustainable by using the laws of affordable and value-based cost.

Values of reliability and sustainability of the supply chain can be inculcated into your commitment only if there is a collaboration between like-minded partners. They operate as an extended arm for your organization to tackle any crisis.

It is important to mention, that to arrive at the right cost one needs to assess the cost of any product by holistically understanding the importance of market research, safety, sustainability & consistent performance that is incorporated in the building of any products& services.

Out of years of experiences, we have developed a proprietary approach plan for designing an ideal supply chain model which we call as “The 5Cs approach”:

  1. Collaboration
  2. Compliance
  3. Control
  4. Commitment
  5. Cost
(Proprietary tool by Liladhar Pasoo)

From above you will see, the first 4 intangibles need to be in place with no room for compromise & their weighted average should translate into the cost for logistics services or transaction.

Most of us still operate with the old school ways of negotiation wherein we constantly emphasis&endeavor to fix the 5th “C”before we freeze the scope & responsibilities of the first 4 “C” s.This inevitably leads in obtaining poor or weak support from the critical supplier/s. Which in turn increases the risk of future mishaps by multi-fold times, where one has no choice but to accept the additional unplanned cost loads.

Hence it is advisable to recognize and remedy the cost-based business challenges through investment in quality collaboration & partnership which will bring in more values and open doors through innovative supply chain possibilities & explore new opportunities for competitive advantages.

Author : Mr. Rajesh Mehta, CCSO & Executive Director, Liladhar Pasoo Group

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