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Planning for Unplanned Spend

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No matter how diligently you plan your company’s budget, there will always be an unexpected expense that will throw everything off. Because of this, it’s essential to plan for the unexpected when defining your budget.

It’s easy to go through your entire budget in just a quarter. To protect your business, it’s important to set aside a budget in the case of unexpected supply chain emergencies. Simply put, your business must plan for the unexpected.

A Costly Supply Chain

The majority of a company’s costs come from the supply chain, which is why they are often the ones tasked with reducing expenses. It may sound counterintuitive, but the best way to reduce your expenses is to have a plan for when excessive expenditures become necessary.

There is a cost for downtime and missed deadlines, and there is a cost for expedited shipping. The choice of which has a higher business cost, in reputation or physical costs, is completely up to you.

Prices Add Up

The costs of downtime can be steep and can far outweigh the costs of an expedited shipment. In fact, in the automotive industry, fines can be as high as $4,000 per minute for trading partners whose delivery failures cause product downtime.

The choice to warehouse extra inventory within a company can also become costly very quickly. In fact, by choosing to store three weeks of inventory instead of four, companies can save up to $65 million in inventory carrying costs in just one year.

These numbers are staggering, but they underscore how much depends on business decisions. Luckily, 3PLs with unplanned spend solutions can help reduce some of these fees and save businesses substantial amounts of money.

The TOC Logistics team is proud to offer supply chain management solutions to mitigate the costs of downtime. Are you interested in learning more? Reach out to a team member today.

12 Sep, 19

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