What are the best ways to manage a manufacturing logistics budget during volatile raw material prices?

Strategic Approaches to Manufacturing Logistics Budgeting Amidst Raw Material Price Volatility - Diversify Suppliers: Avoid dependency on a single supplier to reduce risk. - Negotiate Flexible Contracts: Adjust for market changes. - Efficient Inventory Management: Implement just-in-time practices to minimize holding costs. - Stay Informed: Regularly analyze market trends for better forecasting. - Optimize Transportation: Find cost-efficient shipping methods. #SupplyChainResilience #CostManagement #ManufacturingExcellence #LogisticsOptimization How do you manage your logistics budget during raw material price fluctuations? Share your insights and strategies!

-Get more insight from all stakeholders across your supply chain. Utilize Sales and Operations Planning (S&OP) as a valuable tool to gather comprehensive insights. -Categorize your products and raw materials efficiently. Use ABC analysis based on value to classify goods effectively. Additionally, consider implementing XYZ analysis based on frequency to enhance your categorization process.

First spend time to predict demand, set demand accuracy high 98.5-99.5%, measure constantly and make corrections based on accurate market feedback. Once confidence is in demand, calculate materials and based on a high degree on certainty use as the platform to negotiate prices, volumes and deliveries with suppliers. If suppliers are confident and comfortable with non fluctuating changes from their customers they can plan ahead with confidence and can hence improve stability of supply and prices to the customer.

It is easy to say, to use predictive analytics and forecasts to anticipate future price changes and adjust logistics budgets accordingly, but this may not be the best option. I recommend building strong relationships with suppliers to negotiate favourable terms, such as long-term contracts or volume discounts, as the way to go.

Lean base inventory management and rolling forecast on the manufacturing side will help improve the complete process, and automation for accuracy on raw material ordering and consumption based on historical trends will further boost your working capital management. In todays world where costs are going through the roof, we Nedd to ensure a very lean base operations.

Your suppliers should be selected not just on what price they offer but how strategically they can fit in your supply chain For example, a supplier might be offering lower prices but is located so far from you that the logistics cost exceeds your budget while on the other hand a supplier with higher prices is located near so logistics cost is lower A SWOT analysis and some understanding of opportunity cost might help in this decision

Focusing on cultivating strong supplier relationships is crucial. When engaging with suppliers, pay particular attention to both verbal and non-verbal communication cues. Actively listen to their concerns, seek mutual understanding, and foster open dialogue. This approach not only enhances collaboration but also strengthens the foundation for effective problem-solving and long-term partnerships.

Bulk transportation/Multiple Transporters: You should be aware of market trend, i,e either prices will be increased or decreased and in what span of time, then you should plan your purchase plan of RM/PM accordingly. Ask your transporters to submit quotation and make contract with the cheapest quotation provider for the time period during which the prices remains constant. If prices are changing on daily basis then make a contract on average rates...

Large quantity orders and long schedules may be peaceful but prices may be volatile so binding suppliers is a challenge as when input costs rise suppliers also approach for compensations. Large supplier base can lead to a healthy competition coupled with exclusive agreements in order to bind suppliers.

Negotiate with your suppliers to hold certain inventory on your behalf in their premises (VMI). This reduces the lead-time to produce and also acts as a cushion in case of demand volatilities.

Cost Efficiency: Implement/Enhance JIT , EOQ techniques and ABC analysis based on value & criticality to minimize excess inventory. Regularly review and adjust stock levels to reduce holding costs. Cash Flow Management: Align inventory levels with actual demand through real-time monitoring.Adjust procurement and production schedules to prevent capital from being tied up in surplus stock. Risk Mitigation: Establish a robust inventory monitoring system to track raw material prices and adjust stock levels proactively. Diversify suppliers & maintain strategic buffer stock. Responsive Adaptation: Implement agile inventory management practices. Develop protocols for swift adjustments to inventory levels based on realtime market changes.

In my opinion, optimizing your inventory depends mainly on your organization risk appetite to stock-outs, forecast accuracy. For example maintaining low inventory cost and high turnover requires multiple orders which increases the stockout chance during each point of replenishment. Based on the ABC classification, while some risk might be accepted for c category, usually it won’t be accepted for A category so overall inventory can be optimized by defining the appropriate strategy for each category of raw material or finished goods.

Optimize your plant inventory using ABC and XYZ analysis so it will give you better clear picture for inventory management. You can also implement VMI, based on your requirements. If you are importing raw material in bulk then you can also utilize free days on port or you can plan partial dispatches from Vendor end to optimize inventory level at plant. Maintain safety Stock to avoid production stoppage in case of delayed delivery. Place rate Contract to freeze the rates and get delivery within certain time limit to optimize inventory.

When supply prices are very volatile and there is no possiblity to hedge the purchases, any action that reduce the purchase-to-pay cycle will help minimising the risk of getting out of budget. You minimise the risk of suffering with prices high descrepancies resulting in losses and/or increase in your working capital. As it comes to inventory, you have to minimize the lead-times of production or purchases even if the cost of procurement is not minimal.

Le stock c'est de l'argent immobilisé donc il doit juste optimum afin d'avoir une bonne rotation et faire face à sa dépréciation et même son obsolescence avec le rythme insoutenable de l'avancée technologique. Un protocole d'inventaire décrivant l'organisation dans les détails permet d'avoir les meilleurs résultats sur les plans qualitatif et quantitatif

For better control of an inventory in plant you can go with FOB so all shipments will be in your control and according to your requirements you can plan shipments.

Agree, the logistic mode is one of the challenging process in terms of cost and time, streamline the transportation with the “customer” needs will provide more efficient and effective logistic process.

You can use multiple strategies to streamline your logistics operations. Use consolidation services for shipments to reduce frequency and leverage bulk shipping discounts. Use route optimisation software to plan the most efficient delivery paths, minimising fuel consumption and transit times. Collaborate with reliable carriers to secure favourable rates and ensure timely deliveries. Implement just-in-time delivery to align transport with production schedules, reducing storage costs. Remember to regularly review and adjust transportation strategies based on performance data to maintain cost efficiency and adaptability in fluctuating market conditions.

Simplificar o transporte é crucial para conter os custos logísticos. Abaixo, apresento algumas orienta??es adicionais para otimizar o transporte, e gerar economia em sua cadeia logística: ? Agrupe remessas sempre que possível para aproveitar a capacidade dos veículos de transporte. ? Avalie a viabilidade de utilizar diversos modos de transporte, adaptando-se às necessidades específicas de cada remessa. ? Realize avalia??es regulares do desempenho logístico, identificando áreas de aprimoramento e ajustando estratégias conforme necessário. ? Negocie tarifas competitivas com transportadoras. ? Escolha embalagens que assegurem a prote??o adequada dos produtos, ao mesmo tempo em que otimizam o espa?o disponível.

Can use the normal service instead of express/ premium. Logistics companies increase their price for express service but the time of the delivery varies only 1-2 days it's cause the increase of transportation budgets.if it is not very urgent shipment then can use normal service instead of express

Automatizar sistemas, o trabalho automatizado,economia de tempo, ganho em produtividade, estoque enxuto, diminui??o de erro sistemas X estoque físico, manuten??o acertiva

When the individuals’ skills fall short in solving a problem, it’s the technology that can rescue easily! So, increase the dependency on technology more to solve complex problems. For example, use of AI to find patterns of obsolescence / consumption rate and come out with solutions that can help reduce obsolescence or non-moving inventory.

Automation should be implemented once the system has been refined to eliminate waste and inefficiency. A four-step process is shown below. Step 1: Eliminate non-value-added activities from the current process. Step 2: Simplify and streamline supply chain operations. Remove complexity and non-value-added processes. Step 3: Standardize the process and document in Standard Operating Procedure (SOP) to complete the process in the same way and repeatable every time. Step 4: Then, Automate using technology such as AI and machine learning to perform supply chain processes.

Managing of manufacturing logistics budget during volatile raw material prices can be challenging.but there are several effective strategies you can employ to navigate this situation-;regularly monitoring raw material prices-establish supplier relationships-diversify your supplier base-inventory management

L’IA est aujourd’hui un des outils les plus performants pour réaliser cette tache. Il analyse très vite et réalise des préconisations très pertinentes en un temps record. Il suffit dans un deuxième temps de challenger et appliquer le modèle à notre besoin pour prendre la bonne décision.

My favourite way of monitoring performance is through Dashboards. Design a Dashboard of your own choice incorporating parameters such as; * total logistics cost - YTD / month-wise * logistics cost per UoM * logistics cost region-wise / location-wise (destination) * logistics cost plant-wise / source-wise (origin) * per UoM cost service provider (transporter) wise * logistics cost as % of sales * last year vs current year * truck turnaround time * designed transit lead-time vs actual

I would evaluate and monitor the performance across three dimensions: forecast accuracy, inventory levels turnover rate, and supplier performance. If we observe a decline in any or these kpi’s, we'll need toidentify the root cause, implement action plans, and reevaluate. This cyclical measurement approach ensures continuous improvement in our supply chain responsiveness.

*Inventory forecasts and demand planning* The idea is to have just the right inventory levels: enough to meet demand but not so much that you're wasting resources on storage and maintenance. Demand planning goes hand in hand with forecasting. This involves a more detailed approach of looking at specific products or individual SKUs to predict future needs and avoid excess inventory. With effective dock scheduling software, you can optimize the inflow and outflow of goods in your warehouse, ensuring that products are there when you need them and gone when you don't.

Les indicateurs sont indispensables pour mesurer l’évolution de la performance. Grace à eux il sera possible d’ajuster certaines variables pour atteindre l’excellence opérationnelle.

Having Alternative materials and substitutes approved for use, that are most cost effective or less prone to price fluctuations. This can provide additional flexibility in managing your mfg logistics budget. Other opportunities, might be hedging strategies, advance renegotiation of contracts, cost optimization in transportation mode and routes…

*??Some best ways to adapting logistics costs : 1. Material & Product Transparency & Reporting 2. Cost Pass-through 3. Material Substitution & Change 4. SRM & Supply Sources Strategy 5. Procurement Strategy: Fixed vs Spot Prices and Hedging 6. SCM Leveraging

Na busca por um gerenciamento eficiente do or?amento de logística, é essencial n?o apenas abordar aspectos diretos, como previs?o de demanda e otimiza??o de processos, mas também considerar uma vis?o abrangente. Por exemplo: ? Diversifica??o de Fornecedores: Avalie a possibilidade de trabalhar com fornecedores em diferentes regi?es para reduzir o impacto de flutua??es regionais nos pre?os das matérias-primas. ? Estratégias de Hedge: Explore estratégias de hedge financeiro para proteger contra aumentos repentinos nos custos de matérias-primas. ? Colabora??o com a Comunidade: Participe ativamente de redes profissionais, como o LinkedIn, para compartilhar experiências e obter insights valiosos de outros profissionais da indústria.

Lack of materials results in loss of Sales and is ultimately pinned on SC irrespective of the reasons. SC need to be Proactive all the time and be able to pre-empt by close networking with colleagues on one side and sharing the information with suppliers on the other. Needless to mention this has to be done judiciously. Having a collaborative relation with a Supplier helps tremendously in managing logistics costs. This is simply because logistics costs go off track when "urgency" comes into play. Planning and having inventory management arrangements with the Supplier is the key. Communication and transparency play a very crucial role..all the while ensuring Supplier shares the same sentiment.

En estos tiempos volátiles la palabra clave es diversificar. Proveedores, orígenes, modalidades de transporte, medios de pago y de intercambio de información. Por otro lado hay que trabajar en planes de continuidad de negocio y evaluar los riesgos para dise?ar planes para mitigarlos.