The success of your business is inextricably linked to the productivity of your supply chain. Productivity is a simple concept which is determined by the ratio of what you get out to what you put it. The ‘output versus input’ definition involves various factors such as performance of the workforce, use of equipment, manufacturing time and return on capital. Besides logistical infrastructure and analytics consideration, we cannot overlook the most valuable asset which is an engaged and committed workforce for increased productivity in supply chains.
According to a survey by Deloitte in 2014, 79% of companies with high-performing supply chains achieve revenue growth greater than the average within their industries. This leads us to understand how essential it is to improve productivity in supply chains. These five guidelines highlight the vital factors which need to be taken into consideration for a more effective and efficient supply chain:
- Implement a powerful training program
Training plays a key role as far as increasing productivity is concerned. It helps to align the employees’ performance to the company’s visions. Companies need to understand that human beings are the real engines that drive the supply chain. Therefore, investing in the training of employees can positively impact the company to a great extent. Studies show that organizations that invest in employee training outer-perform the market by 45%. Besides, 60% of employees are more likely to stay with an employer that invest in their professional development rather than go to an employer that pays more but does not invest in professional development. Starting by collecting information about the labor force, evaluating where it needs improvement and taking actions in terms of training can lead to productive results. Academies such as Procurement and Supply Chain Academy are especially designed to bring out the best out of employees through high impact eLearning programs. Investing in such training can considerably help employees to acquire the necessary skills to perform their jobs effectively.
- Effective labor management: understanding your most valuable asset
Labor represents the single larger cost component and it is often the most misunderstood and underutilized company asset. People produce results according to the encouragement they receive from their enterprise. Focusing on a performance-based approach, the workforce needs to be constantly empowered. The emphasis should be placed on the core skills of employees and management to empower them. This will result in a more motivated and confident workforce, leading to higher productivity. One way to successfully empower employees is through effective communication. This is where leadership comes into the big picture. Leaders must practice effective communication, create procedure standards, determine a hierarchy of importance and empower the workforce. Defining the Supply Chain goals clearly and concisely will allow employees and management to take advantage of existing and future opportunities for improvement.
- Focus on Supply Chain service performance
One of the most important factors which determine the profitable revenue growth of your business is customer service and most importantly, customer satisfaction. The key is to keep in mind that the customer should be the primary focus when considering a supply chain strategy, network design and performance management. A research conducted by Gartner in 2014, found that by this year (2016), 89% of companies expected to be competing primarily on the basis of customer experience. What should be kept in mind is that the performance of your supply chain will directly impact customers’ perceptions of your business and the service they receive from it. Here are some examples of Supply Chain issues which can have an adverse impact on customer satisfaction and hinder the success of your company:
- Delays in response to customer service request
- Slow time to market for new products
- Inventory shortages
- Poor product or service quality
- Poor order fill and on-time delivery performance
To tackle such problems, the root causes should be determined and addressed as soon as possible to enhance customer satisfaction and create a more successful Supply Chain.
- Implementing New Technology
New technology has drastically changed the way companies manage their supply chains. Not only does technology help companies improve transparency of the distribution network through social media but it also provides additional control over the freight management strategies and improves efficiency. In 2014, 100-plus thought leaders and partners that participated in the US Roadmap for Material Handling and Logistic survey predicted that traditional Supply Chain models will undergo dramatic transformation change due to technological innovation and changes in customer demand between 2015 and 2025. Technology is giving businesses the ability to boost communication and coordination of purchases. If applied efficiently, it has the capacity to increase revenue and significantly reduce costs. Companies have already gone a long way as far as implementing new technologies is concerned but there is more to go. Emerging technologies are going to cause a great impact on supply chains too. Some of these emerging technologies are:
- Sensors and automatic identification
- Predictive analytics
- Cloud computing and storage
- Robotics and automation
- Wearable and mobile technology
- 3D printing
- Inventory and network optimization tools
- Reducing Supply Chain costs
A great deal of costs can be saved by improving, streamlining and optimizing the Supply Chain. A survey conducted by PwC in 2014 revealed that businesses with optimal Supply Chains have 15% lower Supply Chain costs, less than 50% of the inventory holdings and cash-to-cash cycles at least three times faster than those not focused on Supply Chain optimization. Investigating the cost of serving customers is one way to understand how Supply Chain costs affect business success. It is essential to understand that there is fine line between appropriate and excessive supply chain cost-cutting. The main focus should be on trimming away processes and activities which add no value. Some areas to look closely to eliminate poorly managed supply chain expenditure are:
- Excessive transportation costs
- Procurement costs
- Inventory and storage costs
- Inadequate inventory management
- Poor forecast accuracy
Maximizing productivity within the supply chain plays a pivotal role in the current and future success of a business. Paying close attention to the workforce, effective training, implementing new technologies and reducing costs can all help to significantly boost your supply chain productivity. At the end of the day, the focus should be on a performance-driven culture to have an inspired workforce, maximize savings and improve service levels. These elements will contribute to the creation of significant business value for your company as a whole.