The performance of your business is undeniably linked to the success of your supply chain. As an established CEO expanding into new regions or a startup founder looking to takeover certain markets, the optimization of your supply chain could mean the difference between seven percent and 20 percent profit margins. At United Global Sourcing, we’ve seen some pretty large profit margins due to supply chain optimization, but a growth of even 10 percent can help expand companies exponentially. According to the Logistics Bureau, 79 percent of companies that optimize their supply chains reported above-average overall growth.
In most cases, supply chains are not very efficient. The ever-evolving market and supply chain participants keep the industry in a constant state of chaos that has yet to be tamed. Factors like countries, governments, and customers all affect the supply chain in a way that makes it near impossible to be successful. Supply chain costs tend to sink businesses before they ever see a profit. Nonetheless, a diligent, smart sourcing company can find success.
Seven Supply Chain Optimizations
Develop A Supply Chain Strategy
In most businesses, they consider supply chain management an independent function in the company, and that it is not involved in general business strategizing. This is ludicrous. The supply chain is one of, if not the key, factor in global business success. Companies that treat their supply chain like an extension and not a primary function of the company tend to struggle more with success.
Implement the supply chain into the business strategies and goals to better leverage it to achieve determined metrics.
Design The Supply Chain Network
As much as including the supply chain into the business strategies determines success, the need to design the supply chain network to operate at an optimal level is paramount. Focus hard on the outbound distribution aspects of the supply chain. For the rest of the network design, remain flexible, as needs and demands change over time. If your supply chain is already in motion, but you haven’t optimized it yet, consider a network design audit or review to determine where you can streamline the system already in place.
If you want your business to be successful, then you need to focus on customer satisfaction in regards to how your supply chain fulfills it. The customer must be the primary focus, and that means optimizing your supply chain to ensure customer satisfaction. If you cannot satisfy the customer, you will eventually find yourself without customers, which means no business.
Here are some factors that can negatively affect your supply chain performance:
- Slow product times to market
- Long lead delivery times
- Delayed response to customer service request
- Poor on-time delivery
- Poor order fulfillment
- Inventory shortages, creating longer wait times
- Poor service quality
- Poor product quality
If you identify any of these problems in your current supply chain, it’s best to address them immediately. First, you want to determine the root cause. Then, you want to resolve that root cause. Finally, you want to ensure your solution is working with frequent review and analysis of resolution.
Costs of Supply Chain
How much does it cost to meet the market demand using the current supply chain? This question is typically used as a benchmark for success before delving into the finer details of supply chain metrics. Various factors like inventory surplus, shipping costs, product manufacturing costs, etc. all play a role in being able to serve the customers’ demands. Being able to find ways to serve the customer without deteriorating quality of product and delivery times can help reduce supply chain costs, which increases profits.
Here are some ways poorly managed supply chains can inflate overall costs:
- Inventory storage
- Inventory management
- Market forecasting
The level of success your suppliers experience directly affects your supply chain and your business’s success. It’s best to work direct with at least your primary suppliers to decrease supply chain risks or uncertainties as much as possible. Unfortunately, there is always risk in business, but the ability to mitigate risk while retaining opportunity for reward is what you’re going to aim for in this instance.
Remember, your customers do not see a distinction between you, your manufacturer, or your supplier. It’s all one company in their eyes, and it’s important you treat your supply chain as one entity under the same umbrella as your own business.
Ethics and Responsibility
To build off the last point, it’s imperative you operate your supply chain and overall business the right way. Although the various participants in your supply chain are of different entities and businesses, it’s still your responsibility to ensure ethical procurement and corporate responsibility. If something goes wrong in your supply chain, it’s your business that will be liable for the social reputation fallout. Treat your supply chain with the highest regard as you work to meet the demands of the market.
The management of inventory is a huge factor in the success of supply chains. Whether you have too much, too little, or just the right amount of inventory will affect the success of your business. Too much inventory means capital is tied up in products you may or may not sell, which can lead to substantial losses if the market shifts. Keeping your inventory at the amount the market demands is a balance you must master.
Hire A Global Sourcing Company
At Global United Sourcing, we work with you to better optimize your supply chain. The process can be complex, but we have years of global experience. Contact us today to get started!