Did you know that 39% of companies are facing disruptions due to a lack of supply chain management?
That’s right; it has become one of the top challenges companies struggle to overcome, accompanied by hiring and retaining qualified workers, forecasting, faster response times, and rising customer service expectations.
The Covid-19 pandemic sure has its part to play in this disruption. However, as the world is on the verge to kick Covid-19 to the curb, supply chain managers must work full-throttle to get things back on track.
Tips & Tricks : How to optimize your supply chain?
There is a separate supply chain optimization process that companies follow for developing robust strategies:-
|Alignment||Strategy Development, Establishing Objectives, etc.|
|Collaboration||Communicating Strategy, Developing Collaboration Plan, and Identifying Opportunities|
|Optimisation||Partner Deployment, Setting Measurables, and Leveraging Strategic Sourcing|
|Visibility||Strategy Implementation, Utilising Total Cost of Ownership and Assess Visibility|
Here are some expert-recommended tips to optimize the supply chain to help professional supply chain managers get back on the horse. Some of these may seem obvious. However, the angle is what matters, so don’t just read the subheader and move on; dig in and understand the complexity of this domain.
Make a Plan and Outsource Wherever You Can
The supply chain is the blood that pumps the heart of the world economy; without it, the veins will go dry, and there will be nothing to pump to.
Research shows that almost 79% of companies that invest in supply chain optimization significantly outperform the competitors that have not.
However, everything starts with a solid plan; supply chain management is no exception. So to achieve tremendous success, see the whole picture and outline. Know which metrics to measure and what policies to follow. Some of your KPIs should include:-
- Fulfilment accuracy
- Customer order cycle time
- Cash-to-cash cycle time
- Inventory velocity and days of supply
- Per-unit freight cost
If you’re experienced and already working in the field, you may know this – maintaining a supply chain involves a ton of workflows, time, and labour. To oversee, manage, and streamline the entire process can be tedious, time-consuming, and strenuous. Outsource critical parts of the supply chain so you can restore focus on uprooting the company’s product innovation and other core competencies.
Never Rely on Just One Supplier for a Product
In supply chain management, if you follow this golden rule, your supply chain will thank you. For instance, amid the pandemic, when almost every company around the globe was suffering through significant supply chain issues , brands like Nike and Kellogg’s rallied to deal with the changes and were always one step ahead.
Use Case: Kellogs vs Covid-19
Kellogs had to flip their game from sending bulk volumes to supermarkets and schools to feeding people working from home. The best part? Due to the pandemic, people suddenly had time for breakfast. As a result, the sales for Kellogg’s cereal, noodles, and snacks witnessed a surge. However, meeting this demand was no walk in the park. And the brand ran out of the “safety stock”, too. This was when Kellogg’s shifted its focus on the top stock-keeping units (SKUs).
They used up most of the grains stored in silos and warehouses. The suppliers, transportation partners, and warehouse employees worked incredible hours to ramp up the production and meet customer demand. But that didn’t work for very long either; the company needed a permanent resolution and quick. Moreover, the packaging fell through as their supplier ran short due to shipping delays due to Covid-19.
This is when the brand’s procurement team stepped in and “scoured the world” to find a new supplier. And they did; they found an alternative supplier right next door in New Zealand. And since it was right across the border, the lower transportation costs helped make up for the higher costs of paperboard.
Takeaway: If Kellogg’s had an alternate supplier already in the pipeline, none of this would have happened. However, who prepares for the worst-case scenario, right? Well, you should. And that is one of the many things that the pandemic has taught people.
Everybody’s Been Saying It All Along – Communication is Key
And these people are not wrong. You don’t want to spook the suppliers by bombarding them with unrealistic delivery estimates. Moreover, the nature of the supply chain is such that a lot of players on one project can make the sub-contractors feel left out of the loop.
So keep them in the loop, have regular sit-downs with all the suppliers, let them know what’s coming and what the company is planning down the road. This continuous and open dialogue helps build loyalty and trust, which brings us to the next point…
Built Trust with Suppliers, Become Their Confidante If You Have to
The relationship of an organization with its suppliers is a critical factor in fostering better supply chain optimization. And not only with the suppliers but also with the rest of the stakeholders and cross-functional teams.
Strong relationships require transparency and fairness from both ends so everyone can reap mutual benefits. So whether you’re in procurement, quality check, production control, or logistics, developing robust personal and professional relationships with everyone on the team is imperative. It’ll allow you and your team to be more effective.
Don’t Penalize Honest Mistakes – Give Suppliers a Wiggle Room
Humans are prone to error; everyone can make a mistake, so you may have to give the suppliers some wiggle room in the supply chain world. After all, you wouldn’t want someone to penalize you for an honest mistake, right?
However, some companies can’t afford to. For instance, Suzuki follows the just-in-time supply chain method, which is why they need all their suppliers to be on time every single time else their entire production line will come to a halt.
Now, this method of managing the supply chain may be effective in cost-savings in terms of storage and warehousing costs. However, it becomes rather expensive when your personnel have to go through the hassles of following up on the vendor vehicle until it reaches the production line.
This means that everything must be on time at the right place without even a minute’s delay. That is practically impossible and is perhaps the giant loophole in the just-in-time supply chain methodology.
Moreover, it’s also a waste of resources; your people can focus on new development projects but instead indulge in chasing after deliveries, which an intuitive application can do.
But even if your organization follows the just-in-time method, you must allow the suppliers some wiggle room. In such cases, ensure that the raw material reaches you way before the time you need it or have a few parts/material in storage to avoid line-stoppage. Moreover, it is always advised to have multiple suppliers, so if one doesn’t follow through, you have a backup.
Getting to Know your Colleagues from Different Domains – It Can Help Optimise Operations
There are several areas of supply chain management, and it becomes a gruesome job to take care of the different requirements for the same since their individualistic objectives are other.
Irrespective of supply chains management departments such as procurement, logistics, warehousing, production control, quality mechanics, transportation, delivery, or any other areas, it’s vital to know someone from the inside who’s responsible for managing these sectors.
Knowing colleagues who work in these departments or even top-level managers can assist in optimizing supply chains since these key personnel are well aware of loopholes, shortcomings, and other defects. The success of supply chain management lies in taking a coherent view of the entire chain network and understanding the fallacies that lie within these areas.
Making Employee Development a Top-Priority for Better Work Output
Corporations are nothing without their employees and hence the human capital welfare must be prioritized. The onus lies with top decision-makers and C-level executives to set up parameters that work towards employee growth and success.
Also Read: How to Successfully Manage Supply Chains?
Each segment of supply chain management brings its advantages to the table, and hence team managers need to be aware of the key personnel that drives these different aspects.
Companies today involving complex supply chain networks for carrying out their basic operations face immense pressure for delivering goods well in time to their end-users and clients.
Investing in good training and skill enhancement programmes can lead to optimal results for both employees and organizations. A happy workplace creates a positive environment that helps companies generate more revenues and profits.
Focusing on Direct Communication
A typical supply chain network means that many players are involved in performing different roles. in such a diversified environment, the messages can be often lost in transition, which can have severe implications on business plans and strategies
The supply chain managers need to create an environment where both employees and their managers can reach out to solve any issues. Direct communication avoids conflicts, disruptions, and delays of decisions making chains responsive and effective.
There are numerous times when subcontractors, third-party suppliers, and other officers could be left behind in the supply chain ecosystem. Encouraging open-ended communication will involve all the key stakeholders and lead to more robust chain strategies.
Opening up Educational Opportunities for Analytical Professionals
With the influx of data and information coming through the organizations, there has been a need for analytical engineers who can look through these data sets and help utilise them towards cooperation success.
Also Read: Best Jobs in Supply Chain Management
Implementation of analytics in supply chain systems is relatively new and keeps changing once new data is extracted. Therefore, the oncoming analytical engineers need to update their knowledge, skill sets, and tools to stay relevant in the roles.
Supply chain managers must provide the required business knowledge in the form of courses and training modules doc can help this analytical personnel to perform their duties and ask for organization expectations.
Ensuring and Performing Quality Inspections for Purchased Items
Supply chain management roams far and wide, with different operations taking place at the same time. Therefore, regularly conducting quality assurance inspections for ensuring that the raw materials, hardware, software, interlinked processes, and other resources utilized by chains comply with industrial standards.
To make it more clear, here’s an example:-
Consider a situation wherein an organization purchases a paint additive for their manufacturing processes. However, prior to their utilization, the paint needs to be carefully inspected to see that its chemical and physical composition lies within the set-up tolerances developed by that company.
Different parameters define quality and performance indexes for organizations, and these may vary depending on the nature of supply chains networks.
When a purchasing agreement is made between a vendor or any third-party supplier with the firm, specific characteristics need to be carefully inspected, and tolerances need to be established that can be allowed by these systems.
If the item is found to have characteristics outside the ones agreed upon while agreeing, then the company has the right to return it to the vendor.
Proactiveness while Spotting Counterfeit Materials within Supply Chain Topographies
Counterfeit within any organization is a complete no-no. The same goes for supply chain management, where firms that manufacture delicate parts, components, and other minor items can have counterfeit items.
The responsibility rests on supply chain managers and other key personnel involved in decision-making forums to oversee, monitor, and thoroughly analyze the procured material offered by third-party vendors, suppliers, manufacturers, and others.
As per a report conducted by Electronics Weekly, current estimates have nearly 2% of their electrical devices are found to be counterfeit.
Supply chain managers need to identify counterfeit parts and help avoid hazardous situations for their businesses.
Taking an In-Depth into Supplier’s Operations
Supplier plays a vital cog in developing successful supply chain networks, and hence knowing about their practices can help businesses immensely. Just leveraging software isn’t enough; companies need to negotiate with their suppliers to approach a certain level of visibility and access to sub-suppliers critical for a firm’s growth.
Also Read: The Functions of Human Resource Management
Getting an in-depth understanding of how a business operates can help managers understand their internal processes and how they carry out their functions.
Taking Personal Responsibility in Case things go Haywire
Supply chain managers are the caretakers of their organizational pipelines and other key departments. Therefore, there will be various situations wherein things won’t go as planned, execution won’t be correct, and lapses from the employee’s end.
However, just like army leaders marshalling their troops in fights, SCM managers must take responsibility on their shoulders and act accordingly. While managing and surveying a diversified set of sectors and their different operations, there would be instances when managers will have to ask themselves to seek solutions.
Be it maintaining quality, canvassing successful strategies, or even creating value-based supply chains, SCM rides on how its organizational operations are performed.
Getting Accustomed to Performing in Pressure Situations
Diamonds are often made under pressure; the same can be said about supply chain management. While dealing with immense force, strict deadlines, and challenging environments, managers need to keep a calm hand and deliver expected results.
To not lose composure in such events, businesses and their supply chains need to understand their operations thoroughly, analyze the oncoming opportunities and what it brings to the table, and know the impact caused by these situations in long-term plans.
Consistency, hard work, and application of skill sets can help supply chain managers triumph in these pressure situations. They need to figure out how an oncoming technology or software can sit well with organizational juncture and its value for that given corporation.
Comparing Risk Management by Planning Supplier Quality Audits
Modern companies are pushed to deliver quality driven protocols while healing their supply chain systems. In order to maintain such high-quality standards, organizations need to conduct regular audits for playing a pivotal role in ensuring that delivered products meet the specifications set up by suppliers.
Moreover, another practical method to tackle these issues is classifying suppliers by risks and then prioritizing activities subsequently for better clarity. More often than not, suppliers that are of higher chances are those that are critical to product’s availability and quality.
Supply chain managers need to conduct regular and more frequent on-site audits to ensure that they have adequate quality controls and adaptive measures in place.
Negotiating Long-Term Contracts as Partnerships
Supply chain managers can follow a negotiation plan for deeming their third-party contracts as partnerships. What this implies is that it creates a more formal relationship between buyer and supplier.
Like any other workplace relationship involving the giver and taker, setting up contracts in supply chain management ecosystems requires both parties to increase their quality standards.
The byproduct of such a relationship helps create a supply chain management environment that will lead to lesser risks and hazards for the organization.
In this partner-type relationship, the objectives of both buyer and vendor must be clearly defined before forming a partnership.
To achieve desired results as per the organizational junctures, businesses need to work in unison with their supply chain managers to form long-term sustainable relationships.
Compiling a Negotiation Team that Matches Supplier’s Objectives
SCM needs to compile a negotiation team that delegates different tasks amongst supply chains that comply with suppliers’ motives.
Before starting strategies that involve third-party suppliers, vendors, and other procurement officers, businesses need to survey their local models and understand the loopholes created. This will be possible only if the different sectors and their respective managers possess the right set of skill sets for negotiating with suppliers.
Consider an example wherein a junior account manager is sent for bargaining with the managing director. This sets up the supply chain for failures since junior personnel won’t be able to negotiate with one of the organizational leaders.
Therefore, it’s crucial that managers curate a negotiating team with relevant skills and key personnel from the organization.
Having a Deposit Ready for Negotiation
One of the practical ways for creating leverage with a supplier involves having a 50% deposit ready for taking care of negotiation proceedings. In supply chain management, the more down payment an executive department can make, the better chances are there for making better negotiation practices.
Suppliers, too like managers, are concerned about making money through these negotiations that take place in organizational topographies. Addressing the issue at this level requires the willingness of the client in resolving such challenging situations.
Having a deposit amount ready for negotiations is crucial for using it as a reference while working with suppliers in the future.
As seen from the different supply chain management optimization techniques described above, it can be seen that corporations leverage several strategies for ensuring that their supply chains stand apart from their competitors.
Summing it Up!
The various supply chain management optimization strategies mentioned above can help organizations improve their by-lines and make more revenues.
The same courses offered online can help new professionals in utilizing these practices successfully. The onus lies on managers in making their supply chains impactful.
FAQs on Supply Chain Management
Q. What defines supply chain management?
Ans: Supply chain management refers to the integrated process of manufacturing, procuring, supplying, deploying goods and services by a company.
Q. What are different areas of SCM?
Ans: The different areas of SCM include purchasing, manufacturing, inventory management, demand planning, warehousing, transportation, and delivery.
Q. How can managers develop successful chains?
Ans: Supply chain managers need to collaborate with 3 party suppliers and vendors bring them together in organizational channels for delivering optimal results.
Q. Who are the key customers in supply chains?
Ans: Key customers are those that purchase goods in bulk quantities.
Q. How to create more value via supply chains?
Ans: Reaching out to new customers and making goods that offer more value to end-users.
Q. What information needs to be shared with suppliers?
Ans: Sharing information that adds value to consumers and other associated members of these networks.
Q. How to avoid bottlenecks in supply chains?
Ans: By leveraging a transport management system, businesses can avoid bottlenecks in supply chain management.
Q. How to compare with competitors?
Ans: Through researching about competitors and their way of operating, one can learn about comparisons.
Q. How to increase revenues via supply chains?
Ans: Selling more stuff to existing customers, attracting new ones, and raising prices, supply chains can increase their revenues.
Q. What changes can lead to lower costs?
Ans: By increasing transportation capacity utilization, speeding up of supply chain velocity, and other practices.