6 steps to achieve an efficient supply chain
When it comes to your supply chain, complacency is the enemy of growth. No matter how well it's working, you should always should seek ways to improve it.
In fact, according to a Deloitte study, 79% of companies with high-performing supply chains achieve above-average revenue growth in their sectors.
The challenge lies in knowing how to enhance and optimize your supply chain, which can be daunting for both small brands and established e-commerce businesses.
Here, we present the best practices to enhance your supply chain efficiency and take your business to the next level.
What does efficiency in the supply chain mean?
Efficiency in the supply chain refers to a company's ability to use resources, technology, and expertise to minimize logistics costs and maximize profits. The goal of an efficient supply chain is to save money and maximize revenue by optimizing processes and stages within the supply chain.
Efficiency vs. Effectiveness in the supply chain
Efficiency in the supply chain is defined as the internal performance standard of an organization, whereas effectiveness in the supply chain is the external performance standard.
In other words, effectiveness in the supply chain focuses on meeting demands from external groups to your organization, while efficiency in the supply chain is about fulfilling those demands quickly and cost-effectively.
What is responsiveness in the supply chain?
Responsiveness in the supply chain refers to the ability to react swiftly to sudden changes in the environment that affect processes.
A good example could be the ability to scale during the COVID-19 pandemic, such as meeting over double the usual online orders due to lockdowns, or swiftly sending inventory during a period when some of the world's busiest ports were congested with container ships.
Responsiveness in the supply chain: key to tackling current challenges
What sets typical supply chains apart from responsive ones? While luck could arguably favor responsive supply chains, there's much more behind the scenes, from diversifying suppliers and carriers to implementing connected technology that enables real-time tracking across the supply chain.
Flexibility is at the core of a responsive supply chain, implying not only reacting to changes but also being proactive.
The goals of a responsive supply chain include:
- Meeting customer demand (timely delivery at expected costs).
- Scaling up or down when demand forecasts go wrong.
- Managing costs during challenging times.
- Continuously improving processes and workflows to fit current needs.
- Reducing risk through diversification, planning, and establishing the right partnerships.
Several stakeholders are involved in ensuring a smooth-running responsive supply chain, including:
- The company's leaders.
- Manufacturers and suppliers.
- Your fulfillment center(s) and external logistics service providers.
- Technology providers.
- Your carriers.
- Your customers.
All these stakeholders must be responsive communicators and engage in two-way communication.
Efficiency + Responsiveness in the supply chain
Efficiency in the supply chain focuses on achieving more with less, while responsiveness centers on agility and keeping the business afloat when things don't go as planned. However, in reality, efficiency in the supply chain and responsiveness work hand in hand to handle continuous chaos, as supply chains are among the most volatile and delicate elements in business.
At the end of the day, it's not about having an efficient supply chain versus a responsive one, but about having a cohesive supply chain that can move quickly and adapt without losing money. Efficient and responsive supply chains share common metrics to monitor, such as on-time fulfillment, profit margins, shipping speed, and delivery times, among others.
Together, they pursue the same ultimate goal: meeting customer expectations.
How to enhance supply chain efficiency in 6 steps
Whether you're just starting your eCommerce business or already established, improving supply chain efficiencies can seem like a monumental task. If you don't know where to start, here are seven steps to greater supply chain efficiency:
Step 1: Expand supply chain visibility
The first step to enhancing supply chain efficiency is increasing visibility into your logistical operations.
The best way to do this is by implementing inventory management strategies that allow you and your team to track inventory levels as they progress through stages, from reception to storage, packaging, picking, and shipping to customers.
Modern inventory management software (IMS) can offer greater visibility as well as access to real-time inventory tracking, helping you avoid stockouts, pending orders, and excessive storage costs.
By implementing an IMS, you'll also gain access to data and analytics that aid informed business decisions, such as inventory forecasting.
Step 2: Build strong partnerships. The importance of supplier relationships in the supply chain
Communication with your suppliers is key! When you have a good relationship with them, you can plan better and avoid shortages, delays, or issues from the outset.
A reliable supplier is responsible for tracking the inventory-in-process phase (i.e., the movement of raw materials processed into finished products), which impacts the quality of the products you sell and how quickly you can get more inventory.
Suppliers that aren't consistent in delivering a quality product can slow down your supply chain from the start, so it's important to be selective and weed out those consistently causing problems or delays in your purchases.
Once you've found responsible and flexible suppliers, you should continually nurture those relationships through clear and open communication, as well as effectively resolving conflicts.
Step 3: Optimize your supply chain with intelligent automation
If you want to enhance supply chain efficiency, one of the best strategies is automating your processes. Automation allows you to reduce human errors, boost performance and speed, and save time and money in the long run.
By automating time-consuming tasks like order processing and automated shipping, you can optimize operations and increase productivity. Imagine having an automated warehouse that cuts down time, effort, and common logistics errors. You might even consider investing in your own technology and tools to automate your warehouse.
However, we acknowledge that automation technology can be expensive. This is why many e-commerce companies rely on technologically advanced third-party logistics partners (3PLs) that have already made investments in automation. This way, you can reap automation benefits without incurring high costs. It allows you to focus your resources on product development, marketing strategies, and other critical initiatives for business growth.
Step 4: Implement supply chain software
With numerous operations taking place in your supply chain at the same time, it's critical to adopt the correct software and technology to allow your team to work as efficiently as possible.
If you manage warehouse inventories in different locations, consider using a warehouse management system (WMS) that connects to your IMS. This will help you automate order processing, get real-time inventory tracking, have order management tools, and access data reports and analysis.
Of course, implementing a solid technology infrastructure can be costly. Fortunately, many direct-to-consumer firms collaborate with a 3PL that already has the technologies in place to maximize supply chain efficiency.
Step 5: Cultivate supply chain experts
Once you've decided to implement all the aforementioned changes, the next step is to create a training plan for your employees.
Remember that your supply chain is only as good as the people in charge of it. To ensure consistency, efficiency, and correctness in decision-making, warehouse employees, order fulfillers, and logistics managers should be trained on standard operating procedures.
If an employee has been with the company for a long time, seek their input on how to improve warehouse operations. If you lack a logistics team, a 3PL can provide the necessary expertise to manage your supply chain.
Step 6: Get funds to improve your supply chain
Implementing efficient technology and software in your supply chain can represent a significant investment. Don't worry though, because there are financial solutions like Tribal that can help you obtain the necessary financing to acquire the systems and tools that will allow you to achieve an efficient supply chain.
With Tribal, you can access financing options that allow you to maintain your company's operational liquidity and cover the expenses needed to optimize your supply chain. From paying your suppliers to obtaining working capital credit, Tribal provides you with financial tools to boost your supply chain without compromising cash flow.
Don't let financial constraints stop you from improving your supply chain. With Tribal, you can get the financial support you need to implement the best practices and technologies in your business, and thus achieve a more efficient and profitable supply chain.