5 Strategies to Lower Supply Chain Cost & Expand Margin

And an AI-backed 1958 Mercedes electrification project, just for fun.?

In this edition of The Blueprint, I want to dive into three themes I am hearing across the custom manufacturing supply chain industry:?

1. Increased pressure to reduce held inventory
2. Focus on decreasing material COGS spend to expand product margins
3. The need to increase employee productivity to keep OPEX costs low

Executives are constantly asking me for trends on where these cost reductions usually come from and how often it falls solely on supply chain’s shoulders.?

These pressures may originate in global uncertainty and difficult macroeconomic conditions, but they’re also a function of the new reality: Less focus on growth at any cost and more on a predictable path to revenue and profitability.

The bottom line: Everyone (especially supply chain leaders) has to do more with less.

I’m going to be discussing this topic in-depth at an upcoming webinar with SupplyChainBrain. Here is a preview of some of my thoughts on ways to lower costs and expand margins by automating and digitizing aspects of supply chain management.

New Product Introduction Acceleration

Conventional sourcing methods in product development are wildly inefficient and slow down the efforts of even the most ambitious R&D teams. The time spent sending quotes via email, waiting days for responses to specific component questions, and long production lead times spurred by delays at capacity-constrained suppliers result in sluggish development cycles.?

NPI workflows present a major opportunity to introduce tech-backed automation to reduce friction, latency, and inefficiency.?

The result is faster time-to-revenue.?

Bill of Materials Cost Reduction

Parts and materials are 55% of the cost of goods sold using the Industrial Manufacturing median. Through cost-down analysis services and global sourcing strategies, some Fictiv customers have achieved a 10% to 20% lower BOM. Better managing materials is one of the most important initiatives pursued by manufacturers to expand gross profit margins since they comprise the highest percentage of production costs.?

Internal Procurement Cost Reduction

Suppose your team is managing 200 part numbers across ten different suppliers. Internal resources are being used to qualify suppliers, cut purchase orders, and manage the suppliers.

This can be especially burdensome for start-ups and smaller companies with limited personnel resources. Unfortunately, highly valued engineers are often those managing suppliers for these companies, taking time away from much more productive activities like product innovation.?

Digital manufacturing partnerships can dramatically lower fixed internal procurement expenses for custom mechanicals, and again, this can be particularly significant for smaller companies with limited infrastructure, like HEBI Robotics, who estimated an 80% reduction in procurement costs.?

Reduced Capital Expenditures

Capital expenditures is another major line item tying up your cash and putting profitability goals at risk, particularly for new product introduction.?

What if you didn’t have to invest in building up your own physical manufacturing infrastructure for new products, but instead could get to revenue faster, with less cost and risk through leveraging existing networks?

That’s the opportunity with digital manufacturing. In one case study, a medical device company was able to save millions of dollars in combined infrastructure, people and time costs when compared to traditional development and supply chain strategies.???

Join Me for a Live Panel Discussion May 22

Winning companies take a holistic approach to improving profitability that results in accelerated innovation, increased focus, and thriving, productive teams.

If you’re intrigued and want to see more of the specifics and economic impact numbers laid out, download the economic impact whitepaper and join me for a live discussion on May 22, 2pm ET, with supply chain expert Dr. Stephen Timme, PhD Finance and Director of Operations at robotics company Apptronik , Rebecca Davis .

Just for Fun: Electrifying a 1958 Mercedes with ChatGPT

Now that your head is spinning with financial projections, here’s something fun as a counterbalance!

Every year I choose a personal build project to keep my MechE skills sharp. For 2024, I’ve chosen the fun (and slightly daunting) task of converting a 1958 Mercedes into an electric vehicle. I'm calling it Project Electra.?

And to make it even more fun, I've teamed up with ChatGPT as my "chief engineer" for research, coding & calculations and my friend William Burke , CEO of Five Flute , for extra engineering power.?

Follow along our phase 1 progress on engineering.com.

The above note is part of my newsletter, The Blueprint, where I talk about supply chains, technology, and mBOMs.?

Subscribe to receive each new edition, monthly.?

Learn more about Fictiv and how we help companies simplify sourcing for custom manufacturing at www.fictiv.com.