May 17, 2017      3 min read

Supply chains make and break businesses. The best thought out marketing plans and the most efficient inventory management strategy are unable to compensate for stock simply not being there. Supply chain management, which is all about ensuring reliability and redundancy within the procurement process, is critical to business success. Let’s look at five ways to improve the health and performance of your business’ supply chain.

Develop relationships with key suppliers

Unreliable suppliers are the most common supply chain weakness. If you are unable to rely on your suppliers to deliver inventory in good condition and within deadline, you may find it difficult to plan your own operations, particularly where timeframes are tight. If you use a supplier regularly, it is often a good idea to connect with key people from the supplier to develop a relationship and understand the opportunities and constraints within their business. This meeting is a good place to clarify expectations and standards, as well as create relationships that will make it easier to iron out any future problems.

Implement redundancies

A key aspect of supply chain due diligence is to look for weaknesses throughout the supply chain. Is a vendor, or even a whole industry, dependent on one source of a product? Implement an alternative procurement pathway if possible. In 2000, lightning struck a microchip plant operated by Philips in New Mexico, USA. That plant supplied both Nokia and Ericsson, two major telecommunications manufacturers. While Nokia was able to use alternative procurement pathways, Ericsson was close to dependent on the Philips facility and production was disrupted for over five months. Ericsson lost hundreds of millions of dollars of sales and, crucially, market share.

Invest in technology

Procurement should not be managed using spreadsheets or other manual solutions. Spreadsheets are error prone, require extensive maintenance and become more difficult to use as an organization scales. Many vendors allow data interchange, allowing customers to monitor vendor stock levels as well as their own. This provides particular opportunities for e-commerce businesses to integrate with vendors’ processes and hold minimal inventory.

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Identify the right operating model for your supply chain

Successful companies generally outsource some services that are a distraction from their core business. Although logistics will be best placed in-house for some firms, other firms will benefit from outsourcing certain functions such as managing shipment or customs clearance. Consider whether your team has the expertise to effectively run a full service in-house logistics operation, or whether certain specialised functions could be handled by third parties more cheaply or reliably. In some cases, particularly with a growing business, it may make sense to outsource most or all of the supply chain management work.

Use data to drive continuous improvement

Regularly revisit your business’ supply chain performance with a view to identifying areas of good and poor performance. The increasing supply of data provides an opportunity to identify issues and spot causes of poor performance that would have been opaque a decade ago. For example, you may be able to pinpoint trends in vendor performance or identify spikes in demand that are likely to create additional supply chain pressure.

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