The supply chain has become a critical area to establish competitive advantage. As costs fluctuate and margins in many industries shrink, the ability to deliver the right product to the right location quickly and efficiently is an important value-add that can help you win and keep more business. Ensuring supply chain success requires constant monitoring and improvement. Here are five key areas to focus on to ensure a successful supply chain:
Know your demand triggers. This is the foundation for effective inventory management — anticipating spikes or drops in demand and either taking action to influence demand (offering discounts or promotions) or having the tools in place to increase or reduce inventory before experiencing shortages or overstocks/obsolescence.
You also have to be able to recognize when demand is behaving as expected, or when abnormal events occur. A sudden spike or drop in demand can be influenced by, say, a weather event or an unexpected endorsement. Forecasting shouldn’t be adjusted to reflect these one-off, unusual scenarios. A well-trained staff armed with the right analytics tools can keep your supply chain management activities proactive rather than reactive.
Conduct an effective risk assessment. Supply chain success is predicated on avoiding poor customer outcomes. Define what those outcomes are (they’ll vary by industry and company) and honestly appraise how likely they are to occur as well as the cost of those risks. From there, analyze how to balance those risks. For example, evaluate the cost of being out of stock (and maybe the cost of expedited shipping to cover the stock-out) versus the cost of having too much stock on the shelf, and find a happy medium that results in the lowest cost possible, given that there is always some degree of risk. You also have to be able to compare your forecast data to the pull data to conduct this type of analysis.
Improve inventory visibility. You can’t manage your supply chain if you can’t see what’s happening within it. With modern automatic identification technology (barcodes, RFID) and logistics management tools (GPS data, fleet management systems, etc.) you should be able to track the location of your inventory in real-time or near real-time. Armed with that data you can better predict arrival time for customers, as well as improve re-ordering processes, avoid out-of-stocks, and shift inventory when necessary.
Process and technology Improvements must be flexible and adaptable. Supply chains aren’t static; they evolve and grow right along with your company and the market. Any investment in new supply chain technology should made with future requirements in mind. The same holds true for process changes. The conditions that make a process optimal today are likely to change. Continuous monitoring and improvement efforts will help ensure processes and technology keep pace with your needs.
Promote employee buy-in. Whatever processes or technology you use to improve performance is only going to be as effective as your staff allows it to be. That’s why it’s important to explain your motivations and goals to every stakeholder, from management down to the line workers at the factory or the pickers at the warehouse. Explain how the new processes or systems will help them do their jobs faster or better, and how they will help the company remain profitable or gain new business.
For supply chain success, the IT department, logistics and procurement staff, manufacturing, warehousing, and other departments have to move in the same direction and support each other during changes. Otherwise, it simply won’t work.
