Effective management strategies are crucial for every company, especially in manufacturing. Nonetheless, most studies focus on cost reduction strategies in original equipment manufacturer (OEM) companies, leaving lubricant manufacturers behind. Growing customer numbers, uncertain orders, and demand to reduce total production costs are the main challenges. This chapter suggests cost reduction strategies for outbound logistics at a Selangor-based automotive lubricant manufacturer. Adopting lean manufacturing methods, non-value-added activities may be eliminated in the outbound logistics operation. This chapter will investigate the manufacturer's existing operation waste management practises. The unnecessary costs can be utilized for ongoing development where they will be discussed in this chapter for the elimination of non-value-added work and building logistics efficiency. The findings from this chapter will assist the company to reduce costs while maintaining product quality and customer satisfaction. It should also show the company's commitment in the preparation to adopt Industry 4.0.
TopIntroduction
Due to the rapid growth of economic and technical globalisation, supply chain operations design and management have become essential in achieving maximum profit without jeopardising customer demand and requirements (Sert et al., 2020). Additionally, many companies have been motivated by an uncertain economic and competitive situation on the market to concentrate on effective processes to decrease operating costs. In any company, logistics is generally recognised as the most demanding operations to manage numerous sources of raw material and partially finished products in distributing quality goods to customers in the right amount and time despite pressure on the company to make customer satisfaction with targeted cost savings (Sert et al., 2020).
Therefore, most companies nowadays have created a variety of strategies and methods to ensure their processes and operations are cost-effective. Nevertheless, as the business and customer’s demand grow, there will be additional costs to support the production. The company, therefore, concentrates on the customer's requirements and needs that the services and products must meet the quality, delivery of the product on time and with the minimum waste throughout the process by streamlining the process by using the right cost reduction strategies and quality tools available in the industry. With the right methods and approaches, the operation can run efficiently and avoid unnecessary works (Ishak et al., 2018).
This is where the concept of supply chain management comes in. Supply chain management can be described as the practice involved in producing and transferring a final product from the supplier to the manufacturer and finally to the customer (Larson & Rogers, 1998). In most companies, supply chain management is the area that always becomes a popular topic in the discussion due to the high cost incurred. Hence, the importance of cost reduction strategies is very crucial in the supply chain operation to ensure the sustainability of the company is in a healthy condition.
To understand the existing processes involved, all SOPs associated with logistics operations at the company were collected and reviewed to identify which process contribute to the non-value-added work. the identified process will be reviewed and brainstormed to discuss on how to eliminate the wastes in the process and propose the appropriate cost reduction strategies. The outbound operation process flow can be visualised in Figure 1.
Figure 1. Outbound Logistics Operation Process Flow
Based on the process flow as shown in Figure 1, this paper is expected to provide insights on how to identify the non-value-added works or wastes in the outbound logistics operation, which by implementing the correct cost reduction strategies, the process will be more cost-effective.
Nevertheless, in developing countries including Malaysia, most manufacturing companies face challenges to adopt the Industry 4.0 in their supply chain operation despite the awareness of the benefits that the company can gain from it, such as sustainability, production optimization and quick day-to-today problem solving (Ling et al., 2020). Effective cost reduction strategies are needed in the company to invest for the adoption of the Industry 4.0, where the main challenges faced by the company are the high adoption cost to implement Industry 4.0, besides the time consumption in the planning, developing, testing and monitoring the new system and infrastructure.
This paper is hence structured by taking on the significance of cost reduction strategies to be applied by the company in the competitive market. Many factors should be considered to apply the best cost reduction strategies, and this can be happened successfully by evaluating the impact of the cost with the company’s interest and business Key Performance Index (KPI). Strategic decision tools, such as an evaluation matrix will outline all company’s strengths and weaknesses, as well as challenges on how the strategies affect the company’s performance (Capps & Glissmeyer, 2012).