Michael Galle, Director of Operations
Michael Galle, Director of Operations

For distributors eager to provide as many products to their customers as possible, understanding the supply chain is critical. The components of the supply chain can be complex, and impacting the cost drivers can be frustrating without a full understanding of those components. Because the task of optimizing the supply chain can be daunting, many well-managed distributors simply avoid it.

Every company is different, with each possessing unique characteristics and skills, and so it is likely that your company is managing the supply chain well in some areas, but not so much in others. To effectively evaluate your supply chain without becoming overwhelmed, break the process into three parts, tackling each of them one at a time (and see how AgoNow can help!):

Inbound/procurement

Whether you’re receiving raw materials or finished goods, procurement of product is a common place for supply-chain costs to get lost. Allowing the lure of achieving free freight to impact the decision on how much product you should purchase can be costly, both from an inventory carrying cost and an inventory-control perspective. The purchasing team must examine the full cost of procurement, understanding that suppliers will be factoring freight into product pricing. To help control costs, keep in mind that meeting free-freight minimums may not be the most cost-effective approach. As you search for the cheapest sourcing arrangement, you must work to unbundle product costs from the inbound freight costs for the clearest picture possible.

How AgoNow helps distributors reduce inbound costs: Undoubtedly there are certain suppliers from which it makes sense to purchase direct, where volume, costs and relationships dictate; however, there are always others in your portfolio where cost controls should be enacted. Let AgoNow manage those unique supplier relationships directly, and by doing so, we can unload the burdens of meeting high minimums, having excess inventory carrying costs and dealing with frustrating relationships from your plate. When you source products from AgoNow, you can buy a variety of product lines at levels that won’t overtax your budget, add unnecessary inventory costs or overburden your physical-space limitations.

Facility storage and productivity

Supply chain-related costs are incurred anytime product is stored and movement occurs within the four walls of your business. The cost for moving each product will vary depending on several factors, including its size (impacting storage space needs) and how difficult it is to access. To reduce supply-chain costs inside your own four walls, ensure that high-turn items are within easy reach, and consider reducing your stock levels of large, difficult-to-store/handle items where sales velocity is slow, but effort to store and handle is high.

How AgoNow enables distributors to better manage their productivity: When using AgoNow as your “remote warehouse” and accessing a broad menu of products quickly and efficiently, the cost of owning inventory, both from an acquisition and storage perspective, can be reduced significantly.  We can provide bundled supplier products delivered in a timely manner, allowing your team to focus on your customers rather than on dealing with multiple vendor deliveries and overflowing dock/storage space. A partnership with AgoNow will assist you in optimizing your inventory spend and improving employee productivity, which are two of the most impactful cost drivers within the supply chain.

Movement to the customer

Outbound freight costs are a necessary part of doing business for most. The ability to quickly deliver product to customers is key to their level of satisfaction and loyalty. Controlling these costs is another factor in better supply-chain management. Not all outbound freight options are equal, and certainly the variety of sources can be daunting. First, while continuing to meet your customer’s needs, consider a carrier that best fits the geographical area of service.

While many LTL (less than full truckload) carriers show broad coverages, they frequently use interline partners for final-mile delivery. They typically do not share this fact, and therefore, many times a different carrier delivers product to your customer than the one that picked up the product from your dock. This can be frustrating if/when issues arise and will ultimately add costs. Make sure that when shipping products to your customer, you are using a carrier that will make the final-mile delivery and that has a good reputation within those served areas. Secondly, don’t be fooled by high-discount levels offered by certain carriers looking to earn your business. Discounts offered are based on a carrier’s base rates, and each carrier sets their own based on volume, demand and costs for these lanes. Working to fully understand the base rate from which these discounts are provided is extremely important. A 75 percent discount off of a higher base rate structure may not be cheaper than a 60 percent discount offered by a carrier with lower base rates.

If your business routinely ships via the LTL market, consider your relationships with those carriers, and if you are unsure of how to best manage those, there are many great 3PL servicers that can assist. These third-party service providers have the right relationships and industry knowledge, giving you the best opportunity to leverage your shipment and creating better cost controls of your outbound freight.

How AgoNow reduces distributors’ outbound freight costs: AgoNow actively works with a 3PL partner, leveraging its buying power and relationships to build a freight network with lower costs, better service areas and consistent delivery times. When you partner with AgoNow, these benefits and the savings that come from them are shared with you. AgoNow also offers drop-shipping options that can give you tremendous flexibility in meeting your customers’ expectations. Your customer will receive their product quickly, packaged with a high degree of care, and in the most cost-effective manner possible, all without the customer knowing we were part of the process. The size and scope of your business is magnified while outbound freight and packaging costs are reduced. This helps you control costs associated with this part of the supply chain.

Our customers enjoy these benefits, knowing that the complexities of the supply chain are being effectively controlled. Not yet an AgoNow customer? Visit our FAQs page to learn more, and visit our current promotions page to get 5 percent off your next order.

Michael Galle is Director of Operations at AgoNow.