Supply chain management is something that’s important to businesses and needs to be both effective and efficient. Supply chain management, when done well, simply means you get the results you need on-time and on budget.
However, supply chain management ultimately ends up being anything but simple in most cases.
For example, there are several steps before you even get to the transportation phase. Steps leading up to transportation include planning and information, sourcing, and inventory maintenance.
Production location is the next step in the supply chain. Then you get to transportation. At that point, 75% of American resources are transported via truck.
Anything can happen between those points that can be catastrophic to the chain.
The following are things to know about supply chain management and how to improve overall efficiency.
The Benefits of Supply Chain Efficiency
When you have a deeper understanding of the importance of supply chain management, it can be motivating to put certain steps in place that will facilitate it.
Some of the benefits of an efficient supply chain include:
- Improved collaboration: The flow of information is challenging for many businesses, with Oracle reporting 76% of companies don’t have an automated flow of information across the supply chain. The result many say is lost sales.
- Quality control: When your supply chain is efficient, you have more quality control over your direct suppliers. You can implement standard criteria and you can work with suppliers as partners when they meet those requirements.
- Demand: So much of what your supply chain is centered on is keeping up with demand. When you improve efficiency, you also improve your ability to keep up with demand as needed.
- Reduced overhead: If you have more accuracy in your predictions for things like demand, you can reduce your overhead because you can cut down on the storage costs of slow-moving inventory and make room for the things that go quickly.
With those benefits in mind, what can you do to improve the efficiency of your supply chain?
Use the Cloud
Cloud-based systems are a good way to improve supply chain efficiency regardless of the size of your business.
Cloud-based systems can work if you don’t have a dedicated IT department, which small businesses don’t.
Cloud solutions will also improve your visibility, and anyone can access the information from anywhere, which is always good from an efficiency standpoint.
Build Strong Relationships
You want to have partners in your suppliers. It should be a strong relationship that serves as the foundation of your supply chain management strategy.
There are numerous benefits to looking at these relationships as partnerships.
First, your suppliers will be comfortable coming to you if there’s an issue. That can then allow you to both work toward proactive problem-solving solutions rather than having the problem get of hand.
If you have partnerships with your suppliers, it will also help you share the operational burdens, and they’ll be with you as you scale up.
Consider shared values as one of the big drivers in making decisions on suppliers.
While a partnership should be a cornerstone of your supply chain management strategy, you want to make sure there are concrete criteria in place for how you track their performance, including on-time delivery.
Have a Risk Management Strategy in Place
Any business faces risks, but that can be perhaps more pronounced for small businesses. You have to create a risk management strategy focused on potential supply chain disruptions. You need to have in place methods for making sure that you don’t experience disruptions because of things like a lack of leverage.
As part of this, when you’re devising a risk management strategy, integrate the following:
- Be careful about credit lines. If you want to grow your business, having inadequate credit lines can be problematic. If you have a credit hold or cash on delivery status, it can wreak havoc on your supply chain.
- If you rely on overseas suppliers, which many businesses do, have someone on the ground there or someone highly experienced in this area to help you. Yes, it’s an added cost upfront, but it can save you tremendously in terms of reducing supply chain disruptions and increasing efficiency.
- Don’t rely on a single supplier, or if you do also have a backup in mind. There will always be unforeseen circumstances that pop up, and all you can do is try and plan for them to the best of your ability.
- Gather analytics and insight into your ordering schedules and patterns. Software and automation can help you in this area. You need to be able to anticipate your needs, particularly when you’re a smaller business. When you anticipate your needs accurately, you’re in a better position to order when you need to order.
- You might think about purchasing locally if it’s an option. It’ll probably mean higher initial costs, but the tradeoff in efficiency may be worth it. Domestic suppliers can and often do reduce transit times and shipping costs.
Improve Visibility and Automation
Finally, visibility and automation are two of the core concepts you should keep front and center in your supply chain strategy.
Visibility means you have the ability to track every part of your product as it goes through the chain.
One way to facilitate this is to give suppliers the ability to see your inventory in real-time, so they’ll be able to better plan ahead.
Make sure all the key employees within your organization have access to this information as well.
As far as automation, you want to take elements of human error out of your chain as much as possible. Software solutions are a big part of this. Whatever can be automated should be, not only to reduce errors but also to streamline your process.
With efficiency in your supply chain, you’re likely to be more competitive and profitable and face fewer expensive obstacles along the way. You can then focus on growing your business rather than fixing the fall-out from issues with your supply chain.
