How to Safeguard Your Supply Chain Against Rising Cost of Fuel

Have you considered the long-term implications of the increasing cost of fuel on your supply chain? Maybe you’ve noticed persisting fuel surcharges on your logistics invoices, or perhaps your operating costs have increased? Either way, as the price per litre continues to rise, so too does the necessity to safeguard your supply chain – it’s not just about the prices at the petrol pump. At the risk of stating the obvious, transportation is expensive. It can account for up to 55% of a business’ costs (a percentage that is increasing as fuel prices rise), making it a make-or-break for many organisations, especially considering the fact that there seems to be no end to the price hikes. But it’s not all doom and gloom – you can prepare your supply chain for rising cost of fuel with some key best practices:

Prioritise Flexible Infrastructure

In recent years, supply chains have undergone enormous changes in response to shifting product needs, increasing consumer demand, increasing labor costs, environmental considerations and so forth. An important risk mitigation strategy is to have the flexibility to employ multiple routes to market. This also provides the ability to rebalance product flow in relation to changing input costs.

Focus on Network Optimisation

You should re-evaluate where your distribution centres are located in relation to areas of key demand, and consider moving facilities to more optimal locations. That way you can source products and raw materials that are closer to the end-market, in order to reduce transportation costs. Rising costs and additional inventory requirements mean that there’s method in moving supply chain activities closer to key markets, and further network optimisation will help you to find a balance between inventory costs, distribution centre locations and labour costs. Certain distribution centres may need to be added, removed, or moved, in order to ensure your supply chain model matches current conditions.

Implement Postponement Strategies

Sending unfinished goods to warehouses or facilities where the goods can be assembled and distributed closer to primary markets as needed, creates adaptability within the supply chain. By sending unpackaged or unfinished goods into areas that are close to the end consumer for final assembly, you can maintain inventory at a flexible level while simultaneously reducing fuel costs.

Consider Your Environmental Responsibility

The fluctuation in fuel prices creates an opportunity to reduce costs while also supporting environmental initiatives. Looking at more sustainable/recyclable packaging options that are more compact in design will increase pallet density, reduce shipping costs and decrease your carbon footprint. Another option to consider in the future would be to use alternative sources of fuel – as these technologies are further developed, they will become more and more affordable.

Good Shipping Practices

While changing aspects of your shipping practices can directly improve your bottom line, it can also benefit the environment. You can do this by consolidating shipping – establishing specific delivery dates with key customers and partnering with non- competitors who ship products to the same locations are two straight-forward ways to achieve this. Partnering with other brands will lead to decrease in cost, and an increase in shipment density.

Consolidate Your Supply Chain

Consolidating your supply chain through single sourcing – using one carrier and one logistics company – can offer many key benefits. For one, streamlining your supply chain has the potential to significantly reduce risks across the span of the supply network, because managing fewer relationships enables client companies to focus on aggressive risk reduction strategies. Additionally, consolidating your supply chain will result in accelerated transaction times, and will subsequently result in increased speed to market, faster turnaround times, and ultimately, superior customer service.

In Conclusion

While we have little control over the rising cost of fuel, there are many ways to safeguard your supply chain. Gaining a firm understanding of your supply chain and having a dynamic, adaptive approach to challenges brought about by increasing fuel prices will make the world of difference in the long run. By prioritising flexible infrastructure, implementing postponement strategies, consolidating your supply chain, utilising good shipping practices and considering your environmental responsibility, you can implement strategies that will well equip your business to withstand the fluctuating fuel prices.