Optimising the supply chain for efficiency can result in a reduction of costs by as much as 10 to 40%. But how do you go about creating an efficient supply chain? In this article we look at some actions to implement to build an efficient supply chain for your business.
Automate your purchasing activities
Small businesses may have an inventory and purchasing strategy that involves continual manual assessment of stock levels. Subsequently, they place an order when the predetermined minimum stock levels are reached. This micromanaging involves a lot of time and attention to detail that could be better used elsewhere. What is required is an enterprise resource planning (ERP) software with a supply chain management (SCM) component. With this software, inventory can be consistently monitored across all channels and locations with automatic purchases made from vendors when critical stock levels are reached. Not only is this method more accurate, but it also provides a huge savings opportunity as time can be spent on other important business operations.
Historically, inventory management required a lot of attention to detail with multiple counts to reconcile physical stock counts with numbers on paper. This process is fraught with error and consumes a large amount of time and resources. Not to mention the fact that invariably counts are out and stock must be written off for whatever reason. Over time, this represents a significant loss of revenue which is something to avidly avoid. Due to the writing-off of stock and generally accepted error rate associated with a manual system, it is very easy for fraud or dishonest behaviour to take place and go unnoticed. With an automatic system, there is transparency at every level which enables easy and accurate reconciliation of inventory with far less time invested.
Monitor vendor performance
Vendors are a significant part of your supply chain and as such, you can make your own processes as efficient as you like, however you still need the support and efficiency of your vendors in reaching your supply chain goals. Your business can easily monitor the performance of your vendors through metrics such as cycle times and error rates. In doing so, you are able to make informed decisions when it comes to vetting your vendors and deciding who will add value to your supply chain.
Reduce waste through managing returns and repurposing inventory
Your returns process is also a massive part of your supply chain and should not be overlooked when optimal performance is concerned. When a product is returned for whatever reason, it represents a loss of revenue. As such, returns have a dollar value attached and if they occur in multitude, the company’s bottom line will be significantly affected.
It is imperative to have a good process in place that manages these returned products to reduce the loss of revenue and the accumulation of waste. The customer must have their item replaced, that is a given, but how do you manage the returned items? Identify ways of repurposing, fixing or reusing what you can from returned items. For those that cannot be reused, have a process in place to correctly handle the waste. You should also be focused on identifying why the returns occur, assessing the faults and tracing back through the manufacturing process to the root cause so that it can be dealt with.
Just-in-time inventory and manufacturing
Inventory management software can facilitate both the just-in-time inventory and manufacturing models. Stored inventory has many costs associated with it including the cost of storage space, insurance, revenue and lost-opportunity costs. By reducing the amount being stored while still being able to accurately fulfil orders in their entirety when they are placed, is a win-win.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.