November 28, 2022 | Cost Management
When you’re under pressure to reduce costs, the first place that comes to mind is your supply chain. In a perfect world, you can find a supplier with lower prices for raw materials or an alternate vendor for a specific part. But in the real world, it’s not always as simple as that.
In this article, we’ll discuss strategic cost management (or SCM), which involves activities that focus on reducing costs over the long term while also meeting objectives in the short term. You’ll learn how SCM can improve your company’s ability to forecast expenses, plan strategically for potential risks, and monitor performance metrics so you know if your cost-cutting strategies are working.
Strategic cost management is the practice of looking at the big picture when it comes to expenses. In other words, SCM is a long-term approach to managing costs, and it’s not just about finding ways to cut costs in the short term.
The goal of SCM is to reduce costs across the board, from raw materials all the way through to customer service and beyond. SCM can also help improve your company’s overall efficiency by reducing waste, improving the productivity of employees, and increasing customer satisfaction.
SCM is especially important during economic downturns when many businesses struggle to stay afloat. These are times when companies are forced to reduce costs, so they start looking at different aspects of their operations and supply chain.
While reducing costs is always a worthy goal, it’s especially important to implement a strategic plan to do so. As you examine how your company spends money, you’ll also be able to identify areas where you can improve productivity. That’s because SCM is a holistic approach that focuses on both short-term and long-term goals.
The big three are major components of the supply chain. We’re talking about inventory, supply chain management, and operations management. The good news is that improving any or all these areas will likely result in reduced costs.
If the big three aren’t the best fit for your company, don’t fret. There are a few other ways to improve SCM.
Cost management is more than just finding ways to reduce expenses in the short term. A strategic approach to cost management takes a long-term approach by looking at the bigger picture and finding ways to reduce costs in all areas of the supply chain.