According to a 2017 study, 57 percent of businesses globally regard their supply chain as a competitive advantage.
Globalisation and continually evolving customer expectations are pressuring supply chains worldwide. In response, supply chain leaders need to run holistic assessments. The results of such evaluations can then help tap into more growth and effectiveness.
Here are seven essential supply chain optimization ideas to help you be competitive.
1. Use Technology to Streamline Operations
When it comes to SCM, technology is not just another enabler – it can deliver results in orders of magnitude.
For the 79 percent of supply chain organisations with manual systems, technology holds great promise.
For example, Electronic Data Interchange (EDI) technology is a critical supply chain element.
To illustrate, let’s look at Tesco. When the global retailer fully adopted EDI, their stock was turning seven times. Due to EDI’s impact, the retailer leveled up their stock turn to 17. The result? Profit growth in billions of pounds.
How did this happen?
EDI facilitates trading organisations to exchange information more efficiently by doing it electronically. That instant data exchange helped Tesco and all its partners watch customer behaviour.
The organisation was able to respond rapidly to changing customer demand.
Additionally, costs and time savings increased efficiency across the board. That translated to improvements in the top line.
When you identify and correctly deploy SCM technology, you can introduce efficiencies. The net effect creates a competitive edge.
2. Develop a Supply Chain Council
The input of lower-level management and executive leadership is critical for supply chains. It contributes towards making your SCM more robust.
To this end, you should develop an internal council. The council’s aim is to help make your supply chain strategy efficient.
The cross-functional information flow aligns the supply chain to the overall strategy.
Let’s say a core strategy for your organisation is better inventory turn around.
Pre-existing supply chain practices allowing you to hold raw materials longer won’t help.
An internal governing body can help coordinate supply chain activities. In the end, you will ward off such a counterproductive move.
3. Staffing Appropriately
While technology is critical to shore up your SCM, it won’t do the work. You need to utilise an efficient staffing structure that enhances smooth operations.
Develop and assign specialised managers to oversee parts of your supply chain.
These managers are the ones who will implement the centralised strategy you create. That lends more harmony and effectiveness to the process.
When staffing your supply chain, you should emphasise one issue – strategy.
Don’t look for workers based only on their ability to transact well with top leadership. That only creates implementation loopholes.
Select supply chain staff by looking for people who can support a central strategy. You will end up adding to your firm’s implementation capacity.
To this end, you should pick a leader who can teach others. Specifically, assess the ability to teach others to implement a centralised strategy. That will flow out to external initiatives as well.
That calls for balancing specialisation with exceptional interpersonal skills.
4. Enhance Supplier Relationships
The health of your supply chain will rest, in large part, on the relationships you have with suppliers.
A well-planned supplier relationship management (SRM) can reduce supplier risk. As a result, your suppliers will become more reliable. That reliability will have the secondary impact of stabilising your supply chain.
Once a deal is completed, you should not abandon supplier management. Instead, you ought to keep cultivating that relationship continually.
Strive to have supplier relationships that feature two-way communication. To achieve this, you will need to identify relationship improvement goals. These will ensure you’re always working for a better relationship.
Furthermore, you will also need to agree on a conflict resolution system. Don’t forget to set performance tracking agreements.
Even though these are suppliers serving your business, you need to create buy-in with them. Suppliers have to be internally motivated for your supply chain is to deliver.
Transactional supplier relationships are a business reality at times. But, you should aim to build relational connections too.
Such interactions with suppliers move beyond cost efficiencies. They cement the need to find and explore vested interest on both sides.
In some instances, you can leverage a shared services model with your suppliers.
Going into equity-based partnerships is another way to unlock more value under the right scenarios.
5. Consider Total Cost of Ownership in Procurement
Picking your supplies based on cost might seem wise on the surface, but it creates room for inefficiency.
You should move your policy to picking suppliers based on the total cost of ownership/consumption (TCO) perspective.
Whatever you pay for acquiring a service or product is typically 25 to 40 percent of the TCO. The remaining costs lie in areas like warehousing, operational costs, and transport, among others.
To uncover true TCO, you will need to collaborate better with your suppliers.
6. Let the Supply Chain Handle Contract Management
During procurement negotiations, you typically receive potential savings from suppliers. However, these savings many times go unrealised because of a breakdown in communication.
Over time, when you add up the lost potential savings, you will realise they represent a fair amount of revenue that could have gone elsewhere.
With this in mind, it’s essential to place the responsibility of handling contract management with your supply chain.
With this autonomy, the supply chain leadership can leverage opportunities to cut costs by strategically directing spend.
7. Inventory Optimisation
Holding our inventory comes with a real cost attached to it that can exceed the industry average of 20 to 25 percent.
Therefore, you should seek more accurate demand planning and forecasting data across the supply chain. That will not only help reduce your costs and lift the top line, but the benefits will also cascade to your partners.
Get More Value Through Supply Chain Optimization
If you are like other global businesses, your supply chain is under pressure to keep up with ever-evolving customer needs. Consequently, you need to figure out supply chain optimisation strategies that can shore up weaknesses in your model to generate and leverage more value.
AdvanceFirst Technologies is an experienced specialist EDI company versed in delivering exceptional customer service. Talk to us today for flexible, first-class EDI solutions.