As the saying goes, a chain is only as strong as its weakest link. In times of crisis, your supply chain will likely face unexpected challenges. When this happens, the weakest links in the chain may breakdown from the stress, putting your business at risk. Assessing your supply chain for these weak points is crucial to making it out on the other side during crises. Supply chain optimization could be the difference between your business merely surviving rather than thriving during unprecedented times.
All businesses that make and sell goods have a supply chain, but whether or not it’s a strong one is a different matter entirely. A company practicing proper supply chain optimization is efficient and minimizes costs without sacrificing quality or production levels. On the other hand, ignoring an inefficient supply chain can lead to decreases in customer satisfaction, profitability, and sustainability. Put a crisis in the mix, and you have a high chance of experiencing a break in your supply chain. So, how can an organization bounce back after a piece of the chain falls through?
The more product you have in your inventory, the more product you have losing value. Every company should know the exact number of product they have in their inventory with 100% accuracy. This ensures you can ship to customers on time and be able to calculate exactly what your holding costs are for supply chain optimization. (Fair warning: they are probably higher than the standard 20-25% you are expecting.)
Ongoing strategic supplier management is an important aspect of supply chain optimization. Do you know which suppliers and how many suppliers account for 80% of your spend? Do you have strategic agreements in place and proper purchasing controls to prevent spend in the wrong places? When was the last time you did a data Integrity cleanup to minimize duplication that can cost tremendous amounts of time and money?
You need to consider who is supplying your suppliers, what they are supplying, and at what cost. These are your Tier 2 suppliers, and they’re also the people you should be negotiating with because you are ultimately receiving their product. Know who they are and establish communication with them while also keeping communication with your Tier 1 suppliers. Each time your suppliers optimize their processes, their margins increase, leaving room for your business to negotiate price reductions.
Forecasting is something you should be executing for supply chain optimization and what you should be communicating to your suppliers. Demand is constantly changing, and your suppliers should be informed on how much inventory they need to supply your business. Too much inventory, and those costs will be passed on to you. To little inventory, and you won’t be able to create enough product for your needs. They need to know your demand information and you need to know their lead times, as well as the cost associated with changing your demand.
There are a multitude of other ways to execute supply chain optimization, but the best way to identify your weaknesses is through a third-party supply chain expert. An objective opinion will leave bias out of the mix and ensure no detail goes unnoticed. Oftentimes, it is hard for businesses to shift their perspective and find the problems sitting right in front of them. But, with a pair of fresh eyes from a consulting firm, every piece of your supply chain will be thoroughly examined to reveal its inefficiencies.
Reactive companies will wait for a problem in the supply chain to arise before addressing it, but they are costing themselves time, money, and customers. By becoming proactive in your supply chain optimization, you can avoid any costly mistakes that could be to the detriment of your company. Bolster your supply chain to survive any crisis with our Supply Chain Excellence Assessment. PWI will increase your bottom-line in the most cost-effective manner.