Seven Strategies to Optimize Supply Chain Costs

Article Highlights:

• With the costs associated with maintaining a global supply chain continuously rising and few signs of relief in sight, now is as good a time as ever to optimize supply chain costs. 
• Solutions to optimize costs include tariff engineering schemes, supply chain mapping, onshoring and more. 
• Effective supply chain visibility can help organizations uncover redundancies, excess expenses, and supplier issues that may be playing an insidious role in driving up overhead costs. 
• Supply chain risk management (SCRM) platform Z2Data helps companies achieve comprehensive supply chain visibility through a multifaceted process.

Businesses often train their focus on the price of parts, products, and commodities when looking to trim costs and cut their overhead. But the supply chains those goods travel through may hold even greater opportunities for cost optimization. According to PriceWaterhouseCoopers, in 2018 the total annual logistics spending in the U.S. was around $1.6 trillion, or roughly 8% of the country’s total GDP. More recent data from 2023 has seen that figure balloon to $2.3 trillion, or nearly 9% of the country’s gross domestic product for that year. 

Depending on the industry, organizations can expect to spend 10% or more of their total revenue on logistics. These costs include:

• Shipping and transportation
• Storage and warehousing
• Insurance
• Handling
• Administrative fees

Because there are so many different variables embedded in supply chains—including direct suppliers, sub-tier manufacturers, logistics companies, and warehouses—there’s often a lot of room to identify places to optimize costs, from day-to-day logistics to broader sourcing and footprint decisions. As Oracle recently pointed out, “an inverse relationship typically exists between supply chain costs and supply chain efficiency.” How is this possible? “Operational inefficiencies, such as redundant handling or expedited shipping to compensate for production issues, will drive up costs, while improved production processes will reduce supply chain costs through less waste and resource usage.”

Whatever your company or industry, there are always ways to cut overhead and improve supply chain efficiency. And with rising pressure from tariffs, inflation, and raw material chokepoints, there’s never been a better time to optimize costs.  And with the myriad cost pressures inherent in today’s manufacturing and logistics networks—tariffs, inflation, raw material chokepoints—identifying places to optimize costs is as timely as ever.

Mitigate Tariff Costs and Other Import Levies

If there’s been one dominant trend in supply chains in 2025, it’s the rapid ascendance of tariffs. As of late November, the average effective tariff rate in the U.S. was nearly 17%, the highest figure since 1935. American manufacturers and importers are paying dearly for foreign parts, products, and raw materials, and sector-specific tariffs for imports like steel, aluminum, and auto parts drive those levies even higher. Few industries have been spared some level of impact from the Trump administration’s aggressive tariff regime, and devising measures to mitigate those expenses can provide a meaningful pathway to cutting down on costs and expanding profit margins. 

There are a number of strategies organizations can implement to lessen their tariff burden. Companies might consider tweaking the manufacturing processes for their imports in a way that alters the country of origin (COO)—which often determines tariffs—to a nation with a more favorable rate. Alternatively, businesses can diversify their supply chains, establishing manufacturing in Canada, Mexico, and Europe, where trade costs are comparatively modest and stable. Finally, there’s always the option to onshore manufacturing to the U.S.—a measure the Trump administration is pressuring all American companies to embrace—and we’ll discuss this option in greater detail below.  

Reduce Storage and Warehousing Costs

Supply chain costs encompass a range of different categories, including transportation, processing, and import fees. But one expense that often flies under the radar is storage and warehousing. According to McKinsey, warehousing costs companies a total of nearly $400 billion a year. What’s more, these expenses are on the rise: warehouse prices have increased nearly 3% since 2024, and small facilities with more pricing power and leverage are hiking prices even further. 

In order for businesses to mitigate warehousing costs, they need to start by achieving comprehensive supply chain traceability. This means understanding the full supply chain trajectory of the goods they import, from raw materials to components to subassemblies to products. Once they’re able to trace the pathways of these goods, they can identify where they’re being stored and for how long. There’s a high probability that this type of supply chain tracing will expose one or multiple inefficiencies, giving original equipment manufacturers (OEMs) the opportunity to streamline logistics and reduce the costly downtime goods spend sitting in cavernous warehouses, collecting dust on shelves. 

Invest in Supply Chain Visibility

Finding sensible ways to cut supply chain costs requires data, intelligence, and insights into how a company’s direct and sub-tier manufacturers operate. Effective supply chain visibility is the foundation underlying all these resources, and it can help organizations uncover redundancies, excess expenses, and supplier issues that may be playing an insidious role in driving up overhead costs. Comprehensive supply chain visibility, in other words, is a force multiplier when it comes to supply chain efficiency and resilience, and it can boost a company’s capacity to achieve all the other strategies on this list. 

Supply chain risk management (SCRM) platform Z2Data helps companies achieve comprehensive supply chain visibility through a multifaceted process:

• Supply Chain Data Centralization: Z2Data collects and leverages supply chain data, combining customer information with Z2Data’s own data intelligence in a centralized repository that’s fully controlled, configured, and extended by the customer. This combination of databases lays the foundation for supply chain mapping, risk scoring, real-time alerts, and project execution.

• Supply Chain Mapping: Z2Data’s mapping allows users to see direct and sub-tier suppliers, fabs, EMS sites, assembly facilities, and other manufacturing locations through detailed, intuitive visualizations. In addition, the tool’s part-to-site mapping traces components and subassemblies to their specific manufacturing sites, showing customers how their parts fit into their larger supply chain networks. All mapping is carried out according to a systematic process that includes continuous updating that draws on high-credibility sources—an essential prerequisite to maintaining dynamic, up-to-date supply chain maps. 

• Z2Data Subtier Intelligence: Z2Data’s also helps organizations extend visibility beyond direct suppliers. The tool analyzes millions of data points to identify verified relationships between parts, suppliers, and sub-tier entities, allowing companies to use intelligence within Z2Data’s multi-tier mapping solution to gain deeper supply chain insights. 

Evaluate Cost of Supply Chain Disruptions

As the 2020s have cogently demonstrated, disruptions are a constant factor in global supply chains, be they natural disasters, supply shortages, geopolitical crises, or cybersecurity attacks. Whether they’re aware of it or not, every company that imports goods and sources internationally is incurring costs stemming from supply chain disruptions. Businesses that want to reduce the financial impact of these disruptions need to start by understanding how much these events are costing them on an annual basis. 

After quantifying the total cost of disruptions, organizations can then move onto assessing the available resources for addressing these supply chain risks, and mitigating them before they materialize in the form of costly disruptions. Supply chain risk management platform Z2Data gives businesses a range of capabilities to reduce these costs, including:

• Supply chain mapping
• Supplier risk assessments for over 700,000 suppliers 
• Real-time supply chain monitoring
• AI-powered event intelligence
• Customizable alerts

Taken together, these features help companies identify and assess risks proactively, allowing them to swap out unstable suppliers, diversify away from risky geographical regions, and react decisively when supply chain complications arise. These proactive SCRM measures can save companies a significant amount of money in the long run, solidifying their production continuity and minimizing destructive crises. 

Strengthen Supplier Relationships and Communication 

Original equipment manufacturers (OEMs) are often only in contact with their direct (tier 1) suppliers, giving them little power to see, influence, or shape the operations within their sub-tiers. This means that the relationships they have with those direct suppliers are vital to their ability to maintain healthy, efficient manufacturing networks. By cultivating those relationships and strengthening direct, ongoing communication with tier 1 manufacturers, OEMs can gradually expand their understanding of who their sub-tier suppliers are, what risks may be lurking at the tier 2 or tier 3 levels, and how they can collaborate with their direct suppliers to mitigate those risks in a way that benefits all supply chain stakeholders. 

Consider Onshoring Where Applicable

The primary reason the Trump administration has implemented its aggressive tariff regime is to compel U.S. businesses to bring their manufacturing operations back to America. Thus far, much of the evidence suggests that this initiative has yielded mixed results at best. A recent study found that 9% of U.S. manufacturers have brought some of their production back to the U.S. (While this figure may seem modest, it’s actually a meaningful increase from what was being reported earlier this decade.) 

While there are an array of oft-cited challenges associated with moving manufacturing to America, there are also benefits. Chief among those benefits is a marked reduction in overall supply chain costs. Organizations sourcing within the U.S. pay zero tariffs or other import fees, and have substantially lower logistics costs, especially when compared with sourcing from Asian suppliers thousands of miles away. Finally, supply chain risks are lower when manufacturing is localized, as OEMs don’t have to worry nearly as much about geopolitical conflict, ESG and human rights concerns, or disruptions to complex shipping routes. While the downsides of onshoring have been thoroughly documented, the advantages conferred by shifting manufacturing to the U.S. should be carefully considered, too. 

Utilize an Internal Supply Chain Audit

In order to develop a complete picture of all the suppliers, operations, and other variables that make up a business’s supply chain, organizations may want to consider conducting a supply chain audit. A supply chain audit is an exhaustive examination of each aspect of an organization’s supply chain—including direct and sub-tier suppliers, transportation routes, manufacturing strategies, and lead times—in an effort to uncover vulnerabilities and inefficiencies. An audit can go beyond just helping organizations identify key risks and potential disruptions, though. It can also shed light on systemic root issues—like high-risk regions or subtier suppliers creating recurring bottlenecks—that are generating costly supply chain issues over and over each year. 

While organizations can conduct supply chain audits internally using their own procurement professionals, outside auditors often bring fresh eyes and a critical level of objectivity that can zero in on waste, inefficiencies, and chronic risks. Once an audit is completed, sourcing experts and their leadership can work together to develop and implement appropriate mitigation measures. 

Optimize Your Supply Chain for 2026

With the costs associated with maintaining a global supply chain continuously rising and few signs of relief in sight, now is as good a time as ever to optimize supply chain costs. Whether it’s mitigating tariff burdens, enhancing supply chain visibility, or assessing the full scope of disruptions, these techniques allow firms to evaluate risks, quantify costs, and explore mitigating actions. A SCRM platform like Z2Data can help facilitate all these strategies, empowering businesses with the data, intelligence, and traceability they need to build faster, cheaper, more streamlined supply chains. 

To learn more about Z2Data and its array of risk management capabilities, schedule a free trial with one of our product experts.

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