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A supply chain is a network of people, facilities, and organizations that work together to produce products and services. Today’s global supply chain is more competitive than at any other point in history as the cost of outsourcing has dropped significantly over the past decade.
The compounding effects of rising globalization increased consumer demand, and changing customer expectations have resulted in supply chains across industries being strained by more variability and risk than ever before. Effective Supply Chain Management demands careful management of all members of the extended supply chain organization and a long-term perspective. This requires innovative strategies that solve these challenges with cost-effective and agile processes to meet new demands. Here are five ways to improve your supply chain.
1. Inventory Optimization
It costs money to keep and store inventory. In most cases, this is a labor expense. Labor costs include salaries for employees involved in physical production and shipping and equipment upkeep and repair. However, there can also be intangible costs to managing inventory – such as lost sales due to inventory out-of-stock or theft – that should be factored into your overall inventory management plan as well. Think about how many times you’ve had to order more than you need during an extended sales period; if it happens often, then it’s worth looking into improving your inventory management systems.
2. Enhance the distribution network
There are two ways to enhance the distribution network in order to improve supply chain:
- Cluster approach: Clustering can help you discover emerging trends and artful techniques by comparing several different charts and graphs. It helps you discover which suppliers are inclined to deliver certain goods and services. By comparison, the holistic approach has the advantage of combining large-scale information with smaller-scale, more reliable sources of information.
- Holistic approach: New standards of data-driven organizations are emerging. One of these approaches centers on enabling clusters of distributed systems to work together more efficiently. By applying machine learning and data analytics, these clusters can be made to operate more efficiently and respond more quickly to changing market conditions as well. The main advantage of a holistic approach is that it enables you to get a comprehensive picture of your entire supply chain – from raw materials to finished goods.
3. Take advantage of technology
Most business owners have a vision for how they would like their supply chain to look but don’t necessarily know which steps they should take to get there. An effective strategic plan enables you to take advantage of new technologies while minimizing the risk that any single step may lose you money or cause delays in achieving your goals. The elements of a successful supply chain include effective planning, large-scale actionable items, and his or her ability to deliver on time and within budget.
Examine all current procedures that are generating average outcomes and evaluate where you may make the required adjustments to enhance your supply chain. The use of technologies such as industrial scales can result in a smooth-running, transparent, and approachable supply chain.
4. Establish a healthy relationship with suppliers
The best way to establish long-term supply chain relationships is to work closely with suppliers from day one of your startup. It’s powerful to know what others are thinking and how they’re approaching the project. A good supplier is one who:
- Brings ideas to you that you may not have considered.
- Helps you find money quicker than you think possible.
- Provides you with information before other companies do, which can sometimes give you a competitive edge (and a big contract).
Cultivating and maintaining a healthy relationship with the supplier affects the success of your supply chain network.
5. Frequently review your procedures
Risk management in the supply chain can be achieved through qualitative and quantitative methods. Probing customers or analyzing the past performance of parties involved in the supply chain is an effective way of identifying weaknesses and opportunities for improvement. This saves time and money for organizations while increasing efficiency and effectiveness in reaching key business goals.
Evaluating the adequacy of your supply chain requires a closer look at process management along with an assessment of the adequacy of internal controls to monitor compliance. One of the best tools for conducting a risk analysis is a supply chain monitoring tool. As part of your supply chain management plan, periodically review the activity level of your assigned subcontractors and determine if opportunities for improvement exist within their specific scope of operations.