By getting items to customers at the proper location, timing, and price, supply chain optimization enables you to satisfy customer demand. The first step in supply chain optimization is selecting the appropriate partners, whether they are upstream partners like suppliers or downstream partners like retailers. Building a supply chain is similar to being married in that you go from being strangers to partners, with similar tactics for handling conflicts, working together, and having open communication.
The worldwide pandemic taught us that supply chain management is crucial to the success of your company, at least insofar as it affected business operations. Supply chain optimization enables us to survive as a society, from the futile hunt for toilet paper and PPE (personal protective equipment) in the early stages of the pandemic to needles and special vaccine components that give the greatest answer and allow us to get back to normal. Whether they are in charge of distribution or are essential components of your product, supply chains help business operations work smoothly. In light of this, here are four planning suggestions for supply chain optimization.
Optimizing the supply chain
Let’s start by taking a look at all the tasks that your supply chain does.
Logistics
To guarantee that every link in the supply chain has enough product levels at all times, logistics include the efficient movement of components and completed items. There is minimal safety stock available when supply chain partners select JIT operations, thus having a consistent supply is crucial to success.
Warehousing
Logistics also includes warehouse operations that are well-organized so you keep the least amount of goods necessary while using the least amount of space feasible. These operations are arranged so you always know precisely where to find whatever you need. Since each move of inventory costs money, you want to move it as little as possible. Warehouses operated by intermediaries (like the ones below) are best suited for cross-dock facilities.
Warehouse middlemen offer much more than just a place to keep your product until it is bought. In order to avoid having to wait for the money needed to produce more units, they provide financing by paying for products that are stored. Additionally, manufacturers agree to take on the risk of products becoming obsolete before being sold or of experiencing other losses like damage, theft, or vermin infestation. Providing retailers and even individual customers with volume that is the right size is one of the main sources of value in warehousing. So, instead of being forced to purchase a full truckload of product (resulting in the lowest transportation costs), retailers and customers only purchase the quantity they require, even if that quantity is just one unit. Retailers should receive product assortments rather than a full truckload of a single SKU.
Component parts and raw materials suppliers
As a manufacturer, you require not just a consistent supply of raw materials and component components, but also great quality every time. Attempting to manufacture a quality product with low-quality materials or materials whose quality varies implies that your clients will not receive the best quality product and your brand will suffer.
Retailers
Retailers face similar challenges. They must not only agree to supply your goods and maintain inventory levels adequate to satisfy regular demand, but they must also be a selling partner. They answer consumer queries, demonstrate the benefits of your product, and complete the transaction. Retailers may also use cooperative advertising to promote your brand to end users.
Managing the supply chain
Shop around
To begin, it’s usually a good idea to browse around when seeking for vendors with whom you may collaborate. These are cooperative partnerships, and just as you wouldn’t marry the first person you met, you wouldn’t join a partnership with someone you found through a Google search. There are several firms available to acquire electronic pressure regulators for your business or packaging for finished products.
Conduct research to determine whether the supply chain partner provides the level of collaboration and flexibility that you require. For example, I used to work for a tiny restaurant chain that served hotdogs and chips. When his chip supplier discovered his employees were about to strike, he didn’t keep the restaurant owner in the dark about the impending interruption. He even went out of his way to acquire a backup supply so that the restaurant owner never ran out of chips. Rather than losing the business, the chip provider discovered that the restaurant was even more loyal since they believed they had a great connection and would return to the original chip supply once the strike was ended.
Set up a first meeting.
When selecting suppliers, the first step is to schedule an initial visit with the source before signing any contracts or exchanging money. It’s not the same as talking to someone by email or phone. It’s far preferable to meet in person whenever feasible so you can get a sense of who you’ll be working with on a regular basis and who you’ll be doing business with.
Openly communicate your wants and expectations throughout the meeting to verify the prospective provider is willing and able to satisfy them. If you buy raw materials or components, bring back samples to see how they interact with your current processes. Finally, obtain references and thoroughly examine them.
Wherever possible, negotiate
Negotiating is essential, and this includes not just costs but also performance criteria. A contract detailing obligations, payment schedules, and consequences for non-performance is required for supply chain optimization. International supply networks necessitate extra considerations, such as the country of dispute resolution.
Contracts for supply chain partnerships are sometimes multi-year or formed for a single year with options to extend the contract due to the expenditures generally involved in tailoring operations to service the relationship. As a result, you’re making an irreversible decision. Setting conflicts is often costly and disruptive. Negotiate what you need to maximize performance rather than merely achieving the greatest price while disregarding crucial factors of supply chain optimization such as reliable delivery.
Control your supply chain
Communication is always crucial, and when it comes to supply chain optimization, open and unfettered communication is required. Having stated that, you frequently establish the proper communications through boundary spanners from each organization who oversee the inter-organizational activity. Furthermore, specialized computer software such as EDI (electronic data interchange) can be used to reduce misunderstandings and speed up paperwork. EDI connects with the partner firms’ shipping, invoicing, payment, and ordering systems. Orders typed by the customer are instantly communicated to the seller, eliminating the chance of errors prevalent in retyping orders and the delay inherent in mailing orders. Once the order is shipped, invoices are routed directly through the EDI system to the buyer, who authorizes payment via electronic funds transfer.
In the supermarket business, ECR (efficient consumer response) goes even farther by creating fresh orders for items sold during the day to guarantee adequate stock is constantly on hand.
Conclusion
Supply chain optimization is critical to the success of your business, so think carefully about who you want to collaborate with and how to efficiently manage the supply chain. Negotiate when required, and make sure the partnership works well for both sides.
