How Asset Utilization Can Lower Supply Chain Costs

Companies use asset utilization to track their efficiency over time. While there are several ways to calculate asset utilization, it's most often determined by dividing a company's revenue by its average total sales. Perhaps more importantly, this can tell you whether you are getting a good return on your investments or whether you are wasting investments in your business.

No matter how efficient your company currently is, there are ways to use asset utilization to improve it and lower supply chain costs.

Rent Additional Warehouse Space When Needed

There's a good chance that your business experiences seasonal fluctuations. Depending on what you sell, you might do 50 percent of your business during the holiday shopping season, or you might make 75 percent of your sales during summer.

Some businesses respond to this by purchasing warehouses that can meet their needs at peak times. Unfortunately, that means these companies don't use large areas of their warehouses during less-busy times of the year. In other words, they aren't maximizing their asset utilization well.

Businesses can take a better approach by renting additional warehouse space when needed. That way, they stay lean during the slower months instead of spending money on warehouse space they can't use.

Use Every Vehicle in the Fleet

Many companies make a similar mistake with their vehicle fleets. A bakery, for instance, might own 10 trucks to deliver fresh pastries to its customers early in the morning. Once they're done, the trucks sit idle with nothing to do. When you look at this from an asset utilization perspective, you immediately see how wasteful it is.

A bakery could improve its situation by using fewer trucks over a longer period of time. Instead of making all deliveries in the morning, it could stagger deliveries throughout the day. This way, the bakery easily lowers its supply chain costs without sacrificing its services.

Get More From Employees

The number of employees you pay can also have a significant influence on your supply chain costs. Don't forget that you spend money on things other than just each employee's salary. Associated costs include:

  • Employment taxes
  • Recruiting and training expenses
  • Benefits
  • Space, equipment, and materials

Even after spending money on these things, many businesses don't realize that they aren't using this asset to its greatest potential.

Analyzing sales trends can reveal times when you need fewer or more people at work. If you rarely get orders between 5 p.m. and midnight, then you shouldn't have as many employees on the floor. If you often experience rushes between noon and 4 p.m., then you should have more people on the floor to make sure items are shipped to customers efficiently.

If you aren't using data to decide how many employees you need and when you want them to work, then you are probably spending more money than necessary. It makes more sense to study your business's needs and tailor your workforce to those needs.

At The Apparel Logistics Group, we view associates as our greatest asset, we monitor labor productivity very closely, and we stagger our shifts to align with order cadence. This way, we can be at our most effective and profitable.

Asset utilization can lower your supply chain costs, but you need help from a professional who can maximize your savings. Start by requesting a free consultation from The Apparel Logistics Group. A supply chain professional will contact you within a few days to discuss options that can help your business succeed.

Posted: 6/8/2016 2:39:37 PM by Global Administrator | with 0 comments

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