The threats to and opportunities for the medical device industry over the next several years will be equally substantial. Reducing rampant vendor overspending is one way to tip the scales in favor of manufacturers. By offsetting the recent tax increase, medical device companies can commit more spend to R&D, protect jobs and innovate. And it’s faster than waiting for a political solution.

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Can disaster planning really help prevent these supply chain disruptions? Are the risks associated with lean inventories worth the cost when operations are halted until supplies are re-stocked? Natural disasters like this, and even the current BP oil leak, can prompt manufacturers to look more closely at their master operating plans.

Read More: http://www.manufacturing.net/Article-Handling-Supply-Chain-Disruptions-052110.aspx?menuid=242

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This edition’s topics include:

Watch Your SaaS – 5 Contract Pitfalls:
Think SaaS is all about savings? Think again. SaaS vendors are well trained to maximize your spend over the term of your agreement. This article will show you how to optimize your SaaS contracts for optimal savings…

NPI – A Supply Chain Optimization Partner? You Bet.
Tired of overpriced, underperforming supply chain consultants? See how American Biosurgical partnered with NPI to optimize supply chain performance well beyond the carrier contract phase…

The 7 R’s of the New Normal CIO:
Welcome to the New Normal. As a CIO or IT leader, what can you do to meet the new demands for higher workforce productivity, lower operating costs and higher efficiency within the context of today’s budgetary demands. This article takes a closer look…

Do You Really Need a 3PL?

If you think outsourcing to a 3PL is going to deliver immediate savings, think again. NPI discusses how a more rigorous spend management approach can be a faster, easier and less disruptive way to reduce costs…

Seven Ways to Reduce Shipping Costs in 2010
It’s that time of year again. NPI experts uncover the trends that will impact your spending – and ways you can reduce shipping costs before mid-year…

Unjust Contract Terms
If a company were to take a closer look at their contract, they may start to see the potential penalties and extra fees. The problem is that many companies don’t understand the language of their contract, or perhaps they don’t pay close enough attention to it.

“If a company has a 3-year contract and they want to renegotiate during the second year, they could face some substantial penalties,” Haber said. “That is unfair to a company that has to deal with market fluctuations and product changes, especially if they are stuck dealing with a carrier that can’t handle those types of volume issues.”

Haber adds that shipping companies may include confusing or deceiving options, like deferred rebates, which would be a discount after the fact, or the carrier could exclude fuel surcharges from rebate calculations.

Assessorial Fees
According to Haber, some shipping companies may add high fees for fuel surcharges, or add delivery area surcharges for certain zip codes, which could add substantial charges to a company’s shipping costs without their knowledge.

And these assessorial fees are rising — fees for address corrections have gone up 40 percent in two years. Ground minimum charges are up 6 percent this year, and they rose 9 percent last year. Delivery area surcharges are up 15 percent, and returns shipments are up 16.7 percent. With just about every area of shipping costs increasing, it’s important to cutback wherever possible.

“The company’s hands are tied,” Haber said. “It’s hard to absorb cost increases and fees like that. Try adding rate caps into shipping contracts, or perhaps add an opt-out clause if the fees become overwhelming.”

When looking at shipping contracts, companies can and should try to object to certain fees that they feel are unfair, Haber adds. However, going head-to-head with a major carrier probably won’t be an easy task.

“Companies can face tough negotiations with carriers,” Haber said. “They have little recourse with only two major carriers. They need leverage to get the best pricing.”

“Companies need to consider bringing in a third party that specializes in transportation costs,” Haber says. “They can find areas for cost-savings that companies may not even be aware of. They deal with carriers and contracts often, and they know what to look out for.”

Organizations striving to achieve cost reductions can realize positive results by thoroughly and continuously analyzing the strengths and weaknesses of their supplier mix, identifying areas of consolidation, and determining its impact on capital and operating costs.  Organizational focus on supply chain cost reduction needs to be a series of ongoing initiatives, as opposed to one time ventures.   A regular review of vendor relationships and contracts will help to ensure rates and terms remain favorable over the long term.

At a tactical level, these cost reduction initiatives should include a monthly review of invoices.  The monetary gains associated with monitoring invoices for billing errors are approximately 3-5% of gross spend.  Over the course of a year, catching errors of this nature can lead to thousands, sometimes millions of dollars in savings.  This is an area of cost savings often overlooked, as businesses assume that once their contracts show favorable rates and terms, the work is done. 

Some companies seek to reduce employee numbers as part of their supply chain cost reduction strategy.  While job reductions can play a role in cost savings, it is important to recognize that cutting too deeply can lead to new problems.  When employee counts fall too low, it can become increasingly difficult to implement needed supply chain cost reduction strategies.  History shows that the short term gains associated with job cuts can lead to long term efficiency problems.

Establishing an effective supply chain cost reduction strategy can mean the difference between long term success or failure.  Companies around the world rely on NPI to help them achieve successful supply chain cost reductions that balance efficiency with savings.  Our expertise with implementing these supply chain cost reductions will ensure your business is poised for growth, while still enjoying the benefits of reduced expenses.

Contact us today to learn how NPI can help your business with supply chain cost reduction strategies.

• Achieving significant reductions in overall costs and inventory levels.
• Increased forecasting accuracy.
• Reduced order fulfillment time.

So, how do you know if your business can benefit from a supply chain audit?  There are many factors that contribute to the need, including:

• If you have long term vendor relationships, it may be time to review your contract terms and rates to ensure they are in line with fair market value. 
• If your current suppliers work on a variety of different rates and contract terms, your business should see substantial benefits from a supply chain audit. 
• If you are uncertain as to why you are using your current vendors, or if you do not have up-to-date visibility into their strengths and weakness, an audit can help you to gain a better understanding of these vital relationships. 
• A supply chain audit will benefit your business if you feel your vendors are not executing at their stated or true potential, or if you feel you are not getting the best value for your investment.

When you partner with NPI for a supply chain audit, we conduct a complete analysis of your vendor relationships, contracts and rates.  With our assistance, your business will see cost reductions and improvements in shipping processes.  With a goal of maximum supply chain efficiency, we work with your team to achieve lasting and measurable results.

If your business is ready to embark on a supply chain audit, contact NPI today.