The Indirect Spend of Your Supply Chain

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The 4 Golden Tips of Pallet Spend in Your Supply Chain

The volatile fluctuating price of pallets are one of the origin points of higher costs in the supply chain. Beyond simple supply and demand, inflation has now spread to the goods, materials, and services not directly incorporated into making a product or service. Supply chain service providers are stuck with raising their prices to maintain their hold on the tail end of the whip.

CFOs are paying more attention to indirect costs in their supply chain such as pallets, cardboard, shrink wrap, boxes, and packaging. Companies that ship products must think about how they allocate internal resources and how they want to focus their energy, time, and talent on the processes that provide a competitive advantage.

The following are four tips to manage indirect spending on pallets more closely.

Controlling indirect costs is not easy. Procurement can often put nearly all its direct spend into a software tool and get full compliance from internal stakeholders just because of the nature of the spend. Indirect spending is more challenging because there are typically more suppliers that require interaction, usually at a more granular level (meaning supplier availability at each facility or site).

In this scenario, it’s historically difficult to internally guide buying behavior in the face of shortages and the quirks associated with the local/regional suppliers. Demands across the spectrum of facilities for items like pallets can vary widely.

So, during a volatile and inflationary market, it is an excellent opportunity to optimize processes and develop a sound management plan that utilizes a knowledgeable and trusted partner who understands the market for their portion of that indirect spend. The result? Even a moderate percentage off indirect spend for companies with slim margins improves earnings.

Managing indirect spend more strategically. Most CFO’s will look to affect a behavior change in any procurement manager who regularly deals with external suppliers. To that end, a successful indirect procurement spend that incorporates a sound pallet management program must simultaneously establish multiple buying channels and gather those suppliers into one “bucket”. All while directing purchases to the right suppliers at the right time and negotiating optimal pricing on the fly.

It is akin to spinning plates and adding a new spinning plate with each new supplier. A daunting task and novel trick at best. Without relevant and proper guidelines, indirect procurement personnel may still make purchases outside policies and supplier agreements because circumstances dictate an immediate response to an emergency situation. This is where experienced handling of these situations results in cost savings opportunities that add up significantly.

An experienced partner will have the relationships, market expertise, and the internal administrative structure to implement and support a pallet management plan that is well thought out and provides contingencies that address common challenges in pallet supply situations.

Recycling consumption. Rather than just cost savings from process improvement, more companies need to consider how operations in the supply chain are positively impacted through recycling and re-use processes. In terms of indirect spend, this would require a pallet management program that incorporates recycling of waste stream materials and, in particular, wood pallets.

The recycle and re-use of pallets is not only a cost savings, but also a key point in the claim of sustainability goals in supply chain operations. Recycle and re-use of pallets in a management program can produce a cost savings to the overall pallet spend by upwards of +30% in some situations. Sustainability goals are incorporated seamlessly into this process and are verifiable with the help of a good partner that can demonstrate how pallet recycling can help lower GHG (greenhouse gas) emissions. Studies regarding life-cycle assessment and an environmental product declaration are available and useful as reference documents.

Adopting and implementing a successful pallet management program will serve to accomplish both real tangible results in cost savings and sustainability in supply chain processes.

Transformation of costs into recapture of spend. Considering spiraling costs in supply chain operations these days, companies that ship products on pallets are weighing their options. Cost savings in indirect spend areas like pallets is about simplifying and refocusing processes with the least amount of disruption to current operations.

It involves a dedicated partner that understands the complexity of dealing with a product that is re-useable and recyclable and is potentially supplied by dozens of vendors in markets across the nation. Simplification in this example will be to choose a partner that is experienced and capable of integrating quickly and seamlessly.

In the analysis of any commitments taken by a company and deciding to implement a pallet management program, these are some of the questions to be asked: Is pallet management something we should be focused on? How are cost savings in the indirect spend with pallets tracked and is it a process that can be tracked and reported with relevant metrics. Does it make more sense to continue to buy at a facility level or should this function be outsourced to an external partner? How do we automate processes and tasks around these activities? What is buyback and how does it affect the overall cost of a pallet supply?

A good pallet partnership with the right company will answer these questions, help you to understand and ask questions that weren’t considered, and provide services that complement the way you do business now and in the future. Contact Pallet Central Enterprises to start the discussion and learn how pallet management can be a key driver of cost savings in indirect procurement.

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