Overview
Cost is a large driver in the the supply chain value equation. In addition, it is the factor that is easiest to forecast and control. As such, it represents fertile ground for many companies wishing to optimize their supply chain.
Supply Chain Costs
- Wages: are typically a lost cost of any business process. As such, a critical component of reducing wage cost is to identify employees that spend a portion of their idle time, mostly due to bottlenecks in the process. Bottlenecks are typically identified by mapping out the process and identifying the input/output relationships and throughput for each sub-process.
- Managing Inventory: holding inventory represents a cost to the firm. It incurs both storage and maintenance costs, as well as opportunity costs.