Supply chain management is changing every day and it’s important to know how to use IT to optimize it. Get 10 best practices to improve it.
The major trends in business today, such as low-cost country sourcing, outsourcing, customization, and globalization, all create a lot of complexities in the supply chain. Despite this, most companies have not changed the way that they manage this critical part of their business.
With increasing globalization and changing customer expectations, the supply chain is very different from the supply chain of the past. To access the growth and revenue of an effective supply chain, proven changes need to be implemented.
1. Set up your supply chain council.
Without this, your supply chain won’t have a clear strategy for efficiency. By supporting your supply chain with leadership and management, you can improve cross-functional communication and demonstrate the value of an organized supply chain, eliminating two common barriers to success with a supply chain.
2. Establish an appropriately staffed supply chain structure.
Your supply chain should be staffed and structured to maximize efficiency. A centralized strategy, implemented by managers is the most optimal approach. When you staff your supply chain, you should focus on strategy, not just transactional ability. Your leaders must extend this strategic thinking toward creating value using strong skills in communication and relationship management.
3. Identify areas where technology can improve and streamline processes.
Manually driven processes are often the cause for a lack of supply chain visibility. Automation can solve this and the uncoordinated nature of supply chain processes. Don’t structure your processes around technology. Instead, review processes that are producing below standard to find areas where technology could make improvements, and choose routing software solutions to fit those needs. With the right technology, you can more easily access accurate and detailed reporting data to inform the right strategic planning and performance measures.
4. Maintain healthy supplier relationships.
These connections should be cultivated and maintained after you finalize a deal. The best relationships have two-way communication between buyers and sellers. Your objectives should include ways to maintain healthy relationships, keep improving them, and resole any conflicts.
5. Look at the total cost of ownership over price.
Move away from the practice of choosing a supplier based only on price. Instead, understand the cost of ownership/consumption or a product or service. Remember that procurement is only part of the cost, and other costs include operating, warehousing, and transportation.
6. Source suppliers strategically.
This is at the heart of successful supply chain management, and by being collaborative, you will get even better results. Successful supply chains are built on talent, technology, internal collaboration, external collaboration, and change management. Collaboration is essential. Engage your suppliers in the decision making process. Get their feedback.
7. Move contract management responsibility to the supply chain.
Potential savings are often negotiated but rarely realized. This is usually due to a lapse in communication, or a lack of follow-through. To avoid this, bring contract management under the supply chain. This lets your supply chain leader leverage spending where there is most opportunity to reduce costs and mitigate risk.
8. Optimize inventory for a reduced cost.
Supply chain management should include optimized inventory quantities. It costs to hold and store inventory. To optimize your supply chain inventory, you must include forecasting and demand planning.
9. Establish regular reviews to ensure efficiency and mitigate risks.
Your supply chain council and leadership team members constantly review your procedures and policies to ensure compliance, efficiency, and currency. This will help to avoid issues such as process bottlenecks and help to streamline your operations while reducing the risk of theft, fraud, and the like. Reducing risk in the supply chain must strictly stick to some very important steps. You need to identify all elements of risk, evaluate their probability of occurrence, estimate the financial impact in the event of a problem, and prioritize any risks for appropriate monitoring and measures of prevention.
10. Be socially responsible and establish some green initiatives.
It’s no longer an option for your supply chain company to choose not to actively reduce its carbon footprint, instead, supply chain organizations must act to become more sustainable and socially responsible if they have any hope of thriving or even surviving. More and more buyers are now considering their environmental impact when they choose suppliers to buy from or work with. On a more general level, social responsibility is also becoming more and more important in what buyers take into consideration when they make purchase decisions. Even a best-in-class supply chain organization should have a clear and measurable framework of policies and procedures designed to improve the workplace for the greater good of employees, the whole organization, and your whole community.
About the Author
Vardan Markosyan is the CEO at Less Platform He spent decades of research and consultancy on business process optimization and system design.