Supply chain is undoubtedly a significant determining factor of competitive advantage. Usually, the part in which most companies face ineffectiveness is often the supply chain. It involves all of the products and raw materials that go into a company to the finished products that go into the consumers’ hands. Managing a supply chain effectively require planning, sourcing, making and delivering goods which determines their costs and quality in response to customer and market needs. Very often, this long procedure involves supply chain elements which are fundamental to the success of any business. A survey by Deloitte in 2014 report that 79% of companies with high-performing supply chains achieve revenue growth greater than the average within their industries.
Hence, it is clear that the success of your organization is highly interconnected with the productivity of your supply chain. Apart from 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. This is why supply chain training is an essential step to consider. Besides, many other supply chain elements are needed to create a successful supply chain. Without those factors, any supply chain has a high probability to face obstructions.
Here are the top 7 Supply Chain elements to consider in order to ensure business success:
Supply Chain Strategy
A survey by Tompkins Consortium in 2014 revealed an unusual fact. Among the business leaders involved in that survey, more than 50% considered supply chain to be a detached business operating function. That is the majority did not feel the need for aligning the supply chain with general business strategies.
However, it has been proven that a well-designed supply chain strategy is part of the ladder, leading to the achievement of commercial goals and subsequently, corporate success. So what does ‘well-designed’ means? It means that your supply chain strategy should be designed in a way that support the overall strategy of your business. Unfortunately, this is not the case in various organizations. Therefore, if you want to be sure of business success, it’s high time to review your supply chain strategy and make sure that it is aligned with your business objectives.
Focus on Customer Experience
Customer service and most importantly, customer satisfaction are the most important supply chain elements which determine the profitability of your business. Hence, it is essential to understand that customer should be the main emphasis when working on a supply chain strategy, network design and performance management. A 2014 research by Gartner, highlighted that since the year 2016, 89% of companies expected to be competing primarily on the basis of customer experience. In fact, the performance of your supply chain will directly influence customers’ views about your business and the service they obtain from it.
Supply Chain Costs
It’s essential to identify that the line between proper and excessive supply chain cost-cutting is a fine one. Therefore, rather than placing emphasis merely on cost-reduction, it’s better to focus on trimming away processes and activities which add no value. Here are some of the ways in which product costs can be inflated by poorly managed supply chain expenditure:
- Excessive transportation costs
- Procurement costs
- Inventory and storage costs
- Waste in the supply chain
- Inadequate inventory management
- Poor forecast accuracy
These areas should be taken into account if you want your supply chain to support, rather than obstruct the general success of your business. A good amount of cost can be saved by improving, streamlining, and optimizing the supply chain. Indeed, the results of a 2014 survey conducted by PwC, stated 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.
To some extent, your suppliers hold the key to your success. Hence, it’s wise to work in collaboration, at least with primary suppliers, in order to minimize supply chain uncertainty. Uncertainty in the supply chain is likely to cost money and impact customer service, making it a disruptive factor in overall business performance. Therefore, collaboration between your organisation and its key suppliers is the most effective way to guard against inventory shortages and other issues.
Additionally, there is also a need to handle supplier/buyer contracts and agreements efficiently. Nowadays, supplier performance and relationship management extends beyond maintaining availability and streamlining the flow of materials through your supply chain. In fact you should also think about ethical procurement and purchasing.
Develop a distribution strategy
It is crucial to have a good distribution strategy to the supplier management framework. It prevents product decay and at the same time enhance customer service. Various reports have mentioned that developing a good plan for distributing your products and services will lead to profitable growth, particularly when corporate leaders strategically think about cost, revenue, and asset utilization.
Pay attention to issues like production facilities, cross-docks, warehouses, and above all customers, location and the network of suppliers while planning your distribution strategy. A proper goal needs to be set for your distribution. It is essential to put in place tactics aligned with your overall supply chain strategy. For example, if you want timely delivery, find out all major stakeholders i.e. production supervisors, delivery teams etc. for the essential process to improve.
Inventory control leads to major benefits and is part of the key supply chain elements to consider. As described by The Inter-American Investment Corporation (IIC), it is vital to keep a thorough record of processes for ordering and receiving a load of goods to make sure that enough inventory is being held while maintaining quality and preventing duplication of orders. The report states that control should be focused on the following functions: the ordering of inventories, the purchase of inventories, the receipts of goods into store and storage. An effective inventory control system leads to numerous advantages for an organization:
- Prevent fluctuations in demand of the company’s products.
- Better customer experience.
- Keep up with the flow of materials in continuing production operations.
- The accurate stock levels are maintained, reducing the risk of making losses.
- Reduces administrative workload, manpower requirement and even labor costs.
- Allows effective use of working capital by avoiding over-stocking.
- Simplifies cost accounting activities.
- Prevents duplication in ordering of stocks.
Implement a powerful training program
All the supply chain elements mentioned above can be given a boost through an effective supply chain training. Indeed, training plays a key role in increasing supply chain productivity. Companies need to realize that human beings are the assets that drive the supply chain. Hence, investing in an innovative training and development program is likely to result into positive outcomes. In fact, this has been supported by studies showing that organizations that invest in employee training outer-perform the market by 45%.
It is good to begin by gathering information about the workforce and evaluate where improvement is needed. From there, employees can receive training on the skills they lack. For instance, Supply Chain Academy trains employees through scenario-based eLearning videos, according to what is required for their role. Hence, learners can directly apply these skills and knowledge actively to their daily jobs.
If you want to ensure that your business will be not just surviving, but booming through the next five years and beyond, your supply chain needs to be at the center of management attention. All those key supply chain elements mentioned in this article, are required to make sure your supply chain is functioning at its best. It is the responsibility of leaders to work towards supply chain excellence and ensure that the workforce reaps the benefits of an effective supply chain training.