Manage your supply chain like a pro with these best practice suggestions.
7 Supply Chain Best Practices You Can Implement Today
When it comes to supply chain execution, there is no one way to do it. How you run your supply chain depends on what products and services your company offers. But, no matter what your business deals in, there are some key supply chain best practices that will help your company succeed.
While not every best-in-class supply chain organization operates exactly the same, they do follow a similar structure. By using some of the same practices, your business will be elevated and more cross-functional.
1. Establish Alliances With Key Suppliers
Although good shipping companies work closely with their suppliers, remember that it should be a 2-way street. Suppliers should be strongly encouraged to reach and communicate with their shippers as well. This open communication will help you avoid any buyer and seller conflicts, that could cause problems for your company.
It will also help you ensure:
- That the relationship open and without any negative feelings.
- Problems are addressed quickly and without finger-pointing and blame.
- The relationship has value for both parties.
- Performance measurements are agreed to and achieved.
Well managed relationships internally and externally will help your business operate smoothly across departments.
2. Engage in Collaborative Strategic Sourcing
When it comes to working with your clients, it is a give and take relationship. You are collaborating with them, therefore it makes sense for them to be involved in the decision-making process.
They don’t need to be a part of every decision you make. But, when it comes to something that directly benefits them having their input can be beneficial.
First: Your customers start to understand the procurement process. With this knowledge, the client will be able to get more actively involved in the decision-making process.
Second: The customer will involve their contacts in the process. This provides valuable input based upon their own objectives and strategies.
Third: Involvement with clients who are actively using the data of your sourcing initiative will result in new ideas and efficiencies.
3. Lean Operations and Shorter Cycle Times
A cycle starts with the need for raw materials. From the moment the order is placed, through to manufacturing the product and delivery to your customer, is your cycle time. The more time you can cut out of that cycle, the leaner your operations can be. The leaner the cycle the more profit your company can make.
This is where having clear supply chain visibility can benefit you. By having a clear idea of what is happening in your supply chain, you are able to cut out unnecessary steps.
Demanding short lead times from suppliers helps, as does a highly efficient process to switch out machinery as needed. Eliminating excess inventory saves both money and physical space.
4. Diversify The Chain
Some small operations can manage by depending on one supplier for a product or material. But as businesses grow, the need to rely on multiple suppliers does too. This is where some redundancies can be good.
Especially, if one supplier is less than reliable or can’t deliver materials quickly. These redundancies will help will help with demand planning.
It might seem that adding layers of overlap is counterintuitive. However, when you experience customer dissatisfaction due to backorder, having a backup supplier will help with the situation.
With your supply chain supported by backup options, it is possible to have an operation with a low chance of break down. When a supply chain has redundancies in it it is far easier to fix a problem before it affects your client.
For example, if a shipment is delayed on it’s way to your, your SCM software would notify you. Once your team receives notification, they will be able to contact your backup supplier and have a replacement shipment sent. This way your client will only be slightly hassled,
if at all.
5. Make Technology Work For You
Supply chain technology is put in to place to make your business more efficient. Understanding and even documenting your processes before you purchase an SCM solution will help fit the software to your business. This ensures that your business practices will drive the program and not the other way around.
It is important to make sure all team members understand what they can expect from SCM software. By having a clear understanding of what an SCM is capable of will help ease the frustrations your team may experience.
There are many reasons why you may be considering adding an SCM to your management strategy including:
- Integration with other carrier systems
- Producing shipping documents
- Or something else you need
It is important to make sure to confirm with the vendor that the system will meet your needs. A well implemented SCM will not only help the executive leadership but every team member that makes up your company.
6. Focus on Total Cost of Ownership (TCO)
When choosing an SCM solution, cheapest is not always best. It often pays to look at the total cost of product ownership. The method of choosing a software solution by ‘getting 3 quotes and selecting the cheapest’ is falling out of favor.
Especially when TCO is more than the initial cost of software. When calculating TCO, you have to include every expense that will be incurred during the lifetime of the software. Small daily expenses will add up over the years and become more of a financial burden than expected.
When looking at TCO, best in class procurement teams have a list of factors they keep in mind.
This may include:
- Supplier visits
All of these factors can add significantly to the original purchase cost – up to 75% in some cases. By keeping these in mind, you will be able to find an SCM solution that fits your companies budget.
7. Supply Chain Environmental Impact
When it comes to running a supply chain it is important to acknowledge your social responsibility and make sustainable choices. Beyond being a social problem, it is also a legal one.
New laws are being put into place in Canada and around the world. These acts and laws are to protect the parts of the world that are being damaged by capitalism, like the Congo.
You can help with these efforts by having your company partake in green initiatives, and being conscious of SECH ratings.
SECH stands for:
These ratings are designed to measure the impact of a business’ actions.
- Environmental impact
- Carbon output
- Supporting the local economy
- The wellness and rights of the people producing the items:
- Anti-sweatshop labor codes
- Effective safety regulations
- Child-labor laws with impact
It has been shown that supply chains can produce up to 75% of a company’s carbon footprint.
While this is not an exhaustive list of all of the best practices, but it is a good place to start. By beginning to implement some of these supply chain best practices your company’s supply processwill improve.
By implementing the above 7 supply chain best practices in your supply chain planning process, you will be protecting yourself, your company, and the environment from irredeemable harm. It’s not hard to do, but it does take focus.