Supply chain management can be a massive operation requiring vast amounts of resources, and, in many cases, it puts a lot of pressure on the organizationโs finances, leading to budget constraints.
Dealing with budget constraints in the supply chain is no fun. Many supply chain managers have no appetite for it. However, it is necessary if the supply chain will experience any success.
In this article, we explore strategies African supply chains can use to navigate the complex maze of budget constraints.
Let’s dive into them.
1. Adopting the Lean Philosophy
Whether or not you are battling budget constraints, waste is your enemy. However, it is much more apparent when there are limited resources. And this is where the lean philosophy can come in handy.
You want to adopt lean principles to isolate wasteful processes and operations and eliminate as much of them as possible without harming the supply chain as a whole. It goes a long way to reduce the pressure on the budget.
The lean philosophy has five fundamental principles: Defining value, mapping out the value stream, creating flow, using a pull system, and striving for perfection.
The five principles create a framework for the supply chain to run more effectively and efficiently. These, in turn, encourage a culture of continuous improvement across the supply chain and organization. Also, leading to the elimination of wasteful or unnecessary processes.
2. Start Opportunity Costing
Opportunity costing is all about priorities in the supply chain. Every department wants a certain allocation of resources. Granted, they may all be important. But some are always more important than most, especially during periods of budget constraints.
This is where opportunity costing or prioritizing resource allocation comes into play. An extreme example is having to choose between acquiring raw materials for the production team or increasing the spending allocation for the maintenance team.
You need to produce to make money, but you must also fix up the machines to produce seamlessly. If you fix the machines, you may not be able to produce, and if you produce without fixing the machines, they might break down completely.
The answer will depend on the supply chainโs pressing need and the damage the machine has sustained. But it is a great example of prioritizing in the face of extreme budget constraints.
3. Carry out a Cost Benefit Analysis of the Supply Chain
A cost-benefit analysis helps you understand how the supply chain utilizes its resources. And it gives you an insight into how you can make things better. It is an effective cost-cutting strategy that many African supply chains can benefit from, especially in the middle of budget constraints.
A supply chain cost-benefit analysis will entail an in-depth analysis of the operation, exploring the cost benefits of each process under it. To thoroughly conduct a cost analysis, you must weigh each decision against the cost incurred and its relevance to the supply chain.
With a well-done cost benefit analysis, you will be able to find out different processes being run inefficiently or costing more than they are worth. This empowers you to either eliminate or optimize them.
When carrying out the cost analysis for the supply chain, it is important to benchmark each process. This way, you can easily identify which processes cost more than necessary.
Benchmarking is comparing the cost of the supply chain processes against industry standards.
4. Demand Planning and Inventory Management
Demand planning and inventory management are two key areas that could swallow up the running cost of any supply chain. Tackling them when in the middle of budget constraints is as vital as it gets.
There are many cases of inaccurate forecasts, which typically lead to overstocking or stockouts. None of which are any good for the supply chain. Overstocking costs the supply chain more in holding costs, and stockouts lead to lost revenue.
Inventory management style can also be an issue. Many African supply chains tend to favour SKU proliferation, leading to dead stocks, which cost the supply chain money.
It is essential to tackle these issues as early as possible to prevent the supply chain from holding on to what is unnecessary. Supply chains can get the most out of these two by leveraging tech solutions, robust market research, and strategic collaboration.
5. Consider Outsourcing
Your supply chain operations may get very expensive, especially when the organization lacks sufficient expertise in specific areas or processes. An example of this could be in the logistics and transportation.
One strategy the supply chain can take advantage of is the outsourcing model. Outsourcing allows that particular supply chain process to leverage the expertise of the supplier or partner. This way, it runs more efficiently and reduces costs in the process.
Because of the model most African supply chains adopt, which is the โprovide service now and get paid laterโ model, outsourcing also helps relieve the pressure on the supply chain finances.
It could be a huge plus for these supply chains in the middle of budget constraints because it allows them to refocus some of their finances.
๐๐๐ฑ๐ด๐ฒ๐ ๐ฐ๐ผ๐ป๐๐๐ฟ๐ฎ๐ถ๐ป๐๐ ๐ฐ๐ฎ๐ป ๐ฏ๐ฒ ๐ฑ๐ถ๐ณ๐ณ๐ถ๐ฐ๐๐น๐ ๐๐ผ ๐ป๐ฎ๐๐ถ๐ด๐ฎ๐๐ฒ, ๐ฒ๐๐ฝ๐ฒ๐ฐ๐ถ๐ฎ๐น๐น๐ ๐๐ต๐ฒ๐ป ๐๐ต๐ฒ ๐ฝ๐ฟ๐ฒ๐๐๐๐ฟ๐ฒ ๐ถ๐ ๐ต๐ถ๐ด๐ต. ๐๐ผ๐๐ฒ๐๐ฒ๐ฟ, ๐๐๐ฝ๐ฝ๐น๐ ๐ฐ๐ต๐ฎ๐ถ๐ป ๐บ๐ฎ๐ป๐ฎ๐ด๐ฒ๐ฟ๐ ๐ฐ๐ฎ๐ป ๐ด๐ฒ๐ ๐ฎ๐ต๐ฒ๐ฎ๐ฑ ๐๐ถ๐๐ต ๐๐ต๐ฒ ๐๐๐ฟ๐ฎ๐๐ฒ๐ด๐ถ๐ฒ๐ ๐บ๐ฒ๐ป๐๐ถ๐ผ๐ป๐ฒ๐ฑ ๐ถ๐ป ๐๐ต๐ถ๐ ๐ฎ๐ฟ๐๐ถ๐ฐ๐น๐ฒ. ๐ข๐ป๐ฒ ๐ผ๐ณ ๐๐ต๐ฒ๐บ ๐ฐ๐ฎ๐ป ๐บ๐ฎ๐ธ๐ฒ ๐ฎ๐น๐น ๐๐ต๐ฒ ๐ฑ๐ถ๐ณ๐ณ๐ฒ๐ฟ๐ฒ๐ป๐ฐ๐ฒ. ๐๐น๐น ๐ผ๐ณ ๐๐ต๐ฒ๐บ ๐๐ผ๐ด๐ฒ๐๐ต๐ฒ๐ฟ ๐ฐ๐ฎ๐ป ๐๐ฟ๐ฎ๐ป๐๐ณ๐ผ๐ฟ๐บ ๐๐ต๐ฒ ๐ฒ๐ป๐๐ถ๐ฟ๐ฒ ๐๐๐ฝ๐ฝ๐น๐ ๐ฐ๐ต๐ฎ๐ถ๐ป ๐ผ๐ฝ๐ฒ๐ฟ๐ฎ๐๐ถ๐ผ๐ป.
Obinabo Tochukwu Tabansi is a supply chain digital writer (Content writer & Ghostwriter) helping professionals and business owners across Africa learn from real-world supply chain wins and setbacks and apply proven strategies to their own operations. He also crafts social content for logistics and supply chain companies, turning their solutions and insights into engaging posts that drive visibility and trust.
