The Essential Guide to Supply Chain Management Best Practices
Today's supply chain management best practices are about developing a vision of your organizations goals and the actions needed to realize them. Goals such as integrated omnichannel strategy, supply chain visibility, and tracking are perfect examples of accomplishments that are impossible without a high degree of orchestration and collaboration. A successful supply chain also increasingly incorporates sophisticated technology that can enable those objectives -- from the connectedness of a digital supply chain to analytics, procurement automation, and delivery.
With increasing globalization and continuously changing customer demands, the supply chain of today looks significantly different from those of the not-too-distant past. In order to access the growth and additional revenue of an effective supply chain, CEOs and supply chain executives need to implement some proven changes.
A recent survey found some critical topics to note about how the current supply chain works and affects an organization overall:
- An organization’s supply chain is a critical business process, not just a business function. Today’s supply chain can bring significant value to organizations.
- Supply chain development is now driven by customers, with shorter lead times and increasing customer expectations. Supply chain optimization is crucial for a successful customer experience.
- Improving efficiency and optimizing performance are the top areas of focus for supply chain executives.
- Supplier relationship is becoming more and more important for best-in-class supply chain organizations, causing a shift in procurement function.
Best-In-Class Supply Chain Practices
In a very real sense, the competition among companies to win business is a competition of supply chain performance. What makes a supply chain organization best-in-class? The answer will vary for each organization, but there are five best practices to adopt now.
1. Make technology work for you.
Too many companies select a platform they hope will make their operations more efficient, and they structure their workflows and processes around that chosen technology. Instead, they should first review the procedures that need improvement, and only then select the technology that best satisfies their process needs. That may seem self-evident, but there are more than a few companies that buy first and figure things out later.
Perhaps that is why in many companies, the supply chain organization seems to be "feeding the system" with information, and they have difficulty retrieving the type of data they need for their future strategies and business decisions.
Best-in-class companies, on the contrary, understand that the system should help them better manage their supply chains. They find a way to use technology to produce beneficial information without having to create different temporary solutions to extract and view the data they need. Those businesses recognize the importance of an efficient software and have adopted strategies and mechanisms to get the greatest benefits from technology.
2. Put contracts under the supply chain function.
Purchasing and procurement teams often negotiate significant discounts during the sourcing process but never fully realize those savings. The reasons for this to happen vary, but they often include a failure to communicate contract terms to the leading organizations and a failure to monitor contract compliance.
More companies are moving responsibility for contract and purchase management to a centralized procurement management system that is integrated into their supply chain processes, rather than leaving it in purchasing, legal, finance, or operations. One benefit of this change is that it ensures the contracts are collected and maintained in a central platform. The migration of the contract and procurement management function to the supply chain operation also allows the supply chain department to leverage more effectively the company's spend, mainly in the area of services, where there is an excellent opportunity for cost reduction and risk mitigation.
3. Optimize inventory.
Having excessive or scarce amounts of a specific item is prejudicial to a supply chain. Inventory optimization relies on precise forecasts for needed items. However, it also requires extensive evaluation and rapid identification of sudden changes in the market, which will impact manufacturing, shipping, and all other aspects of the supply chain process.
It's no surprise that top-rated companies are paying attention to inventory at the highest levels. The real cost of holding inventory is often higher than the generally assumed 20 to 2%. In fact, recent research reveals that inventory holding costs could represent up to 60% of the cost of an item that is held in inventory for one year. Those findings included the holding cost of insurance, taxes, obsolescence, and warehousing.
Poor planning and forecasting are direct causes of inventories that are out of balance with a business's needs. Accordingly, best-in-class companies are adopting solutions that help them manage demand planning and forecasting as an additional means of ensuring optimal inventory levels.
4. Get real-time visibility of your workflows.
One of the main best-practices is to make sure that everyone involved in the process knows exactly what’s happening so they can monitor the progress in real-time. Lack of communication can lead to things being done twice or not being done at all. Industry-leaders are opting for systems that will provide real-time status notifications of all processes done in the supply chain. The more visible their supply chain is, the more accurate decisions they will adopt.
End-to-end visibility can eliminate all potential issues by allowing others to see into the supply chain. This equates a way of self-assessment and tracking of supply chain processes, which lead to greater compliance.
5. Measure your performance as you go.
Measuring your performance and the performance of your partners on a daily, weekly, and/or monthly basis will allow you to know what parts of your supply chain are working and what parts aren’t, so you can cut loose or change anything that’s dragging you down. Using systems that provide reporting and analytics features will make a huge impact on forecasting possible issues as well as leveraging this data for actionable intelligence and change management.
Data has proven to be an essential aspect of supply chains. Supply chain professionals use data to identify inadequacies, create specific solutions, and implement those solutions. Additionally, the use of such data can be applied to creating verifiable forecasts for needs in inventory.
In a changing business environment, the old supply chain management standard isn’t up to the challenge anymore. Supply chain professionals need to stop thinking of their supply chains as cost centers to be managed and made more efficient. Instead, they should think of their supply chain as a business advantage—with the potential to differentiate their company from the competition.
Companies should refocus their efforts on aligning digitally connected purchasing with their own digitally connected solution. That is to say, businesses should match their technology to their model. An up-to-date business requires an up-to-date supply chain.
Today’s cutting-edge supply chain management systems are end-to-end product suites that help businesses manage and optimize their supply chains as one complete network. Because they are fully integrated and cloud-based, these systems provide 100% visibility across the supply chain and can be tailored to react to market demands. With a modern, demand-driven supply chain, you can overcome the challenges of increased buyer expectations, shorter product life cycles, and fluctuating demand.
Orgit Technology’s Supply Chain Management Suite
Orgit Technology's Integrated Supply Chain Platform is comprised of POMS (Procurement Order Management), WMS360 (Warehouse Management System), Vendooo (Vendor & Customer Management Applications), & Solocate (Delivery Management System). Applications are scalable, interoperable and ensure your company’s supply chain performance is optimized.
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