Supply Chain Budgets: Where Is Money Being Spent

supply chain budgets

Supply chain budgets are tightening and supply chain managers need to make prudent decisions on where to invest. There’s no denying that many companies are feeling squeezed by their budgets. Interest rates continue to stay high, and while consumer spending isn’t plunging, the perception that times are tough leaves many holding tighter to their dollars. All of these factors impact how much money is available for supply chain budgets and how supply chain managers allocate those dollars.

Spending on the supply chain is, without a doubt, shifting. A couple of years ago, supply chain budgets were focused on supply stability and labor, with cost containment lower down their priority list. Today, more report cost containment as their highest priority, with labor, stability, and sustainability closer to the bottom. However, in an age of constant disruption, supply chain stability should still be high on the list.

Collaboration is one of the paths to achieving stability. Working closely with partners to provide visibility across the supply chain, companies can better stabilize across the board. The visibility that provides the status of raw materials and components in the pipeline allows for better planning and fewer interruptions to materials flow. While achieving this with your Tier 1 suppliers is generally easy, accomplishing it with less important/smaller players in your supply chain can be more difficult.

At issue is the fact that, other than many larger companies, visibility tools remain futuristic and out of reach for smaller organizations. It should still remain a goal, but if it’s currently not a possibility, consider other ways within your current tighter budget to enhance your supply chain’s stability. In some cases, that means looking for the low-hanging fruit or methods that deliver a rapid return on investment (ROI).

Procurement tasks often fit in well under these conditions rather than putting a full halt to spending. That might look like directing funds to a project in need of a new, smaller piece of equipment rather than funneling it to supplier software where your ROI might not come to pass any time soon. Implementation times are faster in these cases, and the payback might be better than expected after roll-out.

You should also focus efforts on where some of your partners are. When the pandemic laid bare the cost of so much offshoring, it became apparent that finding partners closer to home might be how to mitigate some of the stockouts that were rampant. China, for instance, was a popular place for offshore manufacturing. Between the pandemic and geopolitical drivers, sourcing, manufacturing, and partnering with nearshoring in mind makes sense and can still save you money.

As you watch your dollars, also consider phased approaches to projects rather than taking them on all at once. This allows you to spend in smaller increments while also absorbing changes at an easier pace, something your entire organization might welcome.

Budgeting is never easy, but when times are tough, every dollar counts. Now is a good time to take a good hard look at how you’re allocating your supply chain budgets. Contact the supply chain experts at OPS design today!