An important part of supply chain management is maintaining cost visibility and being able to track the costs associated with each product and shipments. This blog post will outline different types of costs, why it’s important to have cost visibility and the three steps that businesses can take to get a handle on their costs.
What is cost visibility for supply chains?
Cost visibility is the ability for shippers to have a full view of their costs per shipment and per product across their supply chain including freight costs, logistics costs and landed costs.
Why is cost visibility in supply chains important?
In order to make the most efficient and profitable decisions, it is important for businesses to have a clear understanding of all the costs associated with their supply chains.
Unfortunately, in many cases, cost visibility is lacking. This is due to the complex nature of modern supply chains, including different moving players, lack of real-time data, and the volume of systems that operate in isolation, making it difficult to get a complete picture of costs. This can lead to several problems, including supplier overspending, inventory buildup, and missed opportunities to reduce costs.
What are the three types of costs?
Freight cost
Freight cost measures how much your company spends on freight shipping, such as big cargo with far destinations (what does far destinations means). This type of shipping is often prone to accidents, therefore implementing more cost visibility into this area, you may uncover clear hurdles that are easy to remedy and that save money.
Logistics cost
Logistics cost encompass how much your company spends on a scope of logistic activities including procurement, physical labor, storing and transporting goods, packaging processes and so on.
Landed cost
Landed costs measure the total cost of a product from initial production to a customer’s door. Here we focus on creation, procurement, and transportation of goods within your supply chain. Landed cost visibility shows you how much you’re paying for the creation and shipping of goods and what your profit margin looks like.
While getting a grip on cost is always at the forefront of supply chain leaders’ minds, it is crucial to understand how to get there. By prioritizing cost visibility
How to gain cost visibility with a supply chain management platform
Companies can deploy Orkestra, a supply chain management platform, that enables teams to ship, track, and manage their supply chain in one place and in real-time. Orkestra integrates data across ERP systems, manufacturers, carriers and freight forwarders and any other system so you can seamlessly track freight, logistics and landed costs across all shipments and products. So now your finance, procurement, supply chain, and leadership teams have a clear understanding of the costs within your supply chain and has the tools and knowledge to reduce them.
With real-time visibility into costs with custom analytics in Orkestra, teams can cut spend across their P&L by:
- Tracking carrier freight costs and on-time performance vs SLA, and if needed, switch to cost-effective alternatives
- Reduce reliance on emergency shipments
- Maximize capacity on containers
- Reduce inventory carrying costs
- Avoid penalties from delays
- And so much more
A supply chain management platform enables shippers to identify, select, and vet the best carrier, suppliers, forwarders in terms of costs, service levels, and time. By monitoring crucial performance metrics through real-time dashboards, companies take more control over their internal processes and partner network. Having insights into all facets of the global supply chain, companies can optimize their freight spend and reduce costs related to demurrage, detention, and extra storage.
For shippers, maintaining a low cost per order is of utmost importance for improving their bottom line. Orkestra takes out the guesswork and instills confidence in the global supply chain being followed. Learn more about Orkestra.
