Supply chain waste comes from problems with the transportation, handling, and sourcing of goods, parts, and products. As the name suggests, the issue can lead to unusable or outdated inventory that has to be thrown away.
However, the “waste” isn’t confined to raw materials. Shipping or warehousing bottlenecks can also waste employee time and deplete resources like fuel used to transport unused goods. If these issues are repeated because of inefficiencies in the supply chain, they can cause wasted operational costs that eat into company profits.
In this article, we’ll dive into the different types of supply chain waste to understand how they impact costs and efficiency. We’ll also explore the steps companies can take to avoid the problems in the first place.
Overproduction: The silent efficiency killer
Overproduction is when too much of a product is made — more than the market needs or wants. The excess supply often sits in warehouses and becomes obsolete or unusable before the company can sell it. For example, a food production company may produce too much of one product. The excess packages sit in a warehouse and spoil before they get sold. The money, time, ingredients, energy, and resources used to make these unused products are wasted because they do not contribute to company profits.
You can avoid overproduction issues by closely monitoring sales data. This information may reveal patterns that allow you to foresee upcoming spikes in demand. Meanwhile, a well-organized inventory management system can help you decide when current production will not meet demand. You can then time production runs to meet expected demand without creating excess inventory.
Inventory excess: Balancing stock levels and demand
Excess inventory can lead to problems like increased storage costs and the risk of product obsolescence or expiration. A company has to pay to use and operate a larger warehouse to handle the excess stock, or they have to deal with a crowded warehouse where materials and products are more likely to get damaged or lost.
The costs of holding unnecessary stock go beyond storage fees and chaotic warehouses. You might also face insurance costs, inventory tax in some states, and potential losses from unsold products.
Consider conducting an inventory audit to find excess stock. This process involves calculating turnover rates and then comparing these figures to sales data. Regular audits help you define areas of inventory that need adjustment. Also, demand forecasting can assist you in planning warehouse space and shipping operations to avoid bottlenecks.
Transportation inefficiencies: Streamlining logistics operations
Issues like poor route planning can significantly hamper supply chain efficiency. Poorly planned routes lead to longer travel times and increased fuel consumption. In addition to unnecessary operational costs like excess fuel and driver hours, inefficiency on the road has an environmental impact. The extra carbon emissions from the unnecessary miles on the road increase the company’s impact on the environment.
Your company can identify transportation waste in its supply chain by analyzing shipping and delivery routes, measuring fuel usage, and adding together transit times. Electronic logging devices (ELDs) can help you collect the necessary transit data. Then, route optimization and fleet management software can streamline routes and plan shipping operations with the fewest overall road miles and lowest fuel consumption across the fleet.
Optimizing routes and loads for maximum efficiency
As you can see, route optimization software plays a crucial role in enhancing supply chain efficiency. These advanced tools look beyond miles traveled to include other factors in their calculations. For instance, the software might look at traffic patterns, delivery schedules, the type of vehicle, and fuel costs to choose the most efficient route.
By using fleet management software and ELDs, you can track shipping operations in near real-time. This will quickly reveal inefficiencies and limit lost fuel and time.
The final part of transportation efficiency is load optimization. This process focuses on using software to ensure each truck in your fleet has the optimal load so that you can use the minimum number of trips or road miles to meet your shipping needs.
Waiting time: Minimizing delays in the supply chain
Waiting time refers to the idle periods when goods or materials are delayed at various stages of shipping or distribution. These transportation pauses can be due to slow processing, transportation bottlenecks, or disorganized storage.
Wait times can also cause a ripple effect further down the chain. Waiting time can disrupt shipping schedules, leading to missed deadlines and overcrowded warehouses. In manufacturing, for instance, material shipping delays can pause production, backing up the entire flow from factory to distribution warehouse to retailer.
You can solve this problem by finding and defining bottlenecks and other issues causing these delays. In the transportation industry, for example, state-of-the-art tracking and management tools can help find times when shipments are idle. With the proper data connection, your fleet managers can monitor shipments, make real-time adjustments, and collect data to improve shipping efficiency.
Overprocessing: Eliminating unnecessary steps
Overprocessing occurs when a company takes more steps than necessary to meet its customers’ requirements. In other words, this extra effort doesn’t add value to the product. The waste is the cost, time, and resources for the unneeded or redundant steps.
The overly complex processes can impact overall workflow and efficiency in the company and delay downstream supply chain operations.
Process audits reveal instances of overprocessing. You can hire auditors to look at each step in the production and delivery processes to see if it adds value to the final product. This value stream mapping can show you redundancies or unnecessary steps, which you can eliminate to improve efficiency.
Defects: Reducing quality issues and returns
Product defects can impact supply chain efficiency and customer satisfaction. Poor quality or defective products are a major problem. In 2023, the National Retail Federation found that customers returned 14.5% of all e-commerce purchases. When this happens, you have to cover the costs of shipping and processing these returns, and you may also lose the trust of customers and limit the chance of future purchases.
Product defects can come from issues like faulty equipment, poor quality control, or untrained staff operating complex machinery. Products can also get damaged during storage if they aren’t kept in the right conditions or in shipping if they are poorly packed or mishandled.
You can limit defects by improving quality control. Quality assurance inspections, training programs, and digital quality management systems can help these efforts.
Motion waste: Optimizing workplace layout and ergonomics
Motion waste refers to unnecessary movements workers make during their tasks. A single unnecessary motion might not waste much time, but if it gets repeated hundreds of times over the course of a day, it adds up to a significant loss of productivity.
A motion study that analyzes both time and movements can pinpoint issues and give managers information to make the necessary corrections. Then, a well-planned workplace layout minimizes the need for excess movement and allows easy access to controls and materials.
Eliminating supply chain waste can increase efficiency and decrease costs. If your company can address problems like overproduction, inventory excess, and transportation inefficiencies, you can create a waste-resistant supply chain. This will reduce operational costs and improve your customers’ satisfaction as well as your employees’ morale.