PART TWO: Avoiding Hidden Margin Erosion in Mid-Market Supply Chain Operations
Here, we continue from yesterday where TAKE supply chain details early and late payment fees, evaluation and inspection areas as well as a conclusion.
Evaluation and Inspection Areas
Often times, RMA and quality are considered on the fringes of supply chain, but inefficiencies in these areas, usually in the form of manual inventory updates and ineffective notification and collaboration with stakeholders, can have a significant impact on net margin in the form of errors and delays.
Yet another threat to the mid-market company’s bottom line are recalls. Even when inadequate supplier quality control causes a recall, the host company is ultimately the party that suffers. When a recall occurs, unplanned reverse logistics costs for tracking the recalled items and transporting all the recalled items from every end location back to the manufacturer warehouse could cost more than shipping those same items out the first time around.
Late payment fees
Just as late deliveries can incur small but not incidental costs on each delivery, late payments can also affect margins. Without proper automation systems in place, companies have limited visibility into invoices tied to various billing cycles, invoices that may incur fees for late payment (and how much those fees are), or how far each individual invoice has traveled through the payment system.
Today’s solutions enable mid-market managers to group invoices based on payment terms so those batches that are approaching their due date can be flagged automatically, without clerks sorting through them individually. Invoices that meet three- or four-way match criteria are processed for payment. Invoices not meeting pre-established rules and criteria are sent to an exception queue for manual handling. This increases the timeliness of payments as well as expedites problem resolution.
Early payment discounts
One final hidden area of margin erosion is in the form of forgone early payment discounts. This is also a product of manual processes and poor collaboration. Often times, however, AP automation solutions are equipped with a dynamic discounting feature that allows companies to place invoices with applicable discounts into a separate, accelerated queue for faster processing and/or resolution.
In today’s increasingly competitive business environment, mid-market companies must keep margin management and supply chain efficiency at the top of the priority list. There are a number of points in the supply chain lifecycle where margins can be streamlined and improved, from forecasting and planning to returns and billing. Each of these points can be evaluated to determine where improvements can occur.
In the not-so-distant past, mid-market companies might have required an entire department to monitor, analyze, and improve supply chain efficiency. Fortunately, that’s no longer the case. The current array of available supply chain management systems provide powerful, cost effective technology solutions that not only fit into any budget, but can also help minimize or even eliminate many of the most common margin killers.
A mid-market business uncovering the hidden problems highlighted in this article might discover a number of ways to improve margins and the new technology available today means that systematically taking advantage of these opportunities is no longer a Herculean undertaking.