3 Best Ways To Improve Supply Chain Efficiency

August 23, 2016


supply chain efficiency

“In an efficient supply chain, suppliers, manufacturers and retailers manage – implicitly through independent ordering processes between tiers or through explicit coordination of ordering decisions of the different supply chain elements – their activities in order to meet predictable demand at the lowest cost. A responsive supply chain, in contrast, requires an information flow and policies from the market place to supply chain members in order to hedge inventory and available production capacity against uncertain demand.” (Fisher, 1997)

More and more, top management within corporations are identifying the supply chain as a crucial point of competitive differentiation and advantage. In order to get the most out of your supply chain, you need to ensure optimal efficiency.

In recent decades a substantial amount of companies, in sectors varying from automotive and high tech to retail and consumer packaged goods, have understood that the supply chain does not equal the cost of getting their products into the end customers’ possession. These companies realize that it is the supply chain that translates corporate strategy into day-to-day interactions internally and externally. In the end, it is the supply chain that either satisfies or dissatisfies the customers. Industry leaders use a broader definition of the supply chain—one that includes planning, information sharing and value adding elements (e.g. leveraging modern technology, increasing visibility) end to end - from raw material to final distribution, not just logistics. 

Successful companies have made strategic investments into supply chain capabilities and have developed committed, efficient organizations that work to overcome cross-functional challenges. They have outperformed the market maturity level and in-turn have disrupted their industries (as Amazon has done in retail, for example). Leading companies have redefined customer service expectations and their ability to deliver innovation to the market, along with agility. This is how they've managed to turn their supply-chain execution excellence into a very powerful source of competitive advantage.

The story does not end there. The MOST successful companies continue to evolve, develop and reinvent their supply chain, even if they have already achieved a leading position in their respective industry. This help them manage risks; respond to changes in the economic, technological, and competitive environment; and exploit new opportunities more effectively than their competitors. Typically, they are ahead of the industry. 

Top Management Priority!

Supply chain challenges continuously demand top management attention. Achieving excellence supply chain performance and efficiency is no easy task. Production and distribution networks are growing more complex, which is why an efficient process is a must for the winning formula - profitability and resilience. Across the supply chain, risks are constantly increasing, therefore the need for improving transparency is critical in according with coordinating effective responses inside the global value network. Ensuring your supply chain works at its very best requires tight cross-functional execution and the right decision making across the organization. Smartly managing supply chain challenges and leveraging supply chain intelligence allows companies accelerate growth, win market share and improve profibality by capitalizing emerging opportunites.  

That being said, here are three ways you can improve supply chain efficiency:

1. Differentiate your supply chain strategy and your corporate strategy

Your business strategy could be premium service, product innovation, or cost-efficiency...make sure your supply chain strategy is aligned with the business strategy. Your leaders from different functions need to work together to define the supply chain strategy best fit for your organization. Ensure they are providing the data your organization must deliver. Marketing should be aware of what your customers value most from your offering, how those needs vary among customers and segments, and what differentiates you from the market and your competitors. Your sales functions must identify which customers justify the highest service costs, and which are satisfied with less attentive service and more productized offerings. Working together, your supply chain and product development functions will discover ways to develop and launch innovative products that fit the needs and expectations of all customer audiences while keeping overall costs under control.

2. Create a tech-savvy, modern, end-to-end visibility model and team

The times of managing the supply chain in multiple tiers is over. Data integration and analytics enable companies to manage supply chains end to end, and in industries such as retail, in real-time. Ensure you have the right accountability and responsibilities assigned within your team - one leader responsibile for end-to-end KPIs (performance) and for delivering constant improvement projects across all tiers and functions such as marketing, manufacturing, and procurement. Use the data you have at your hands, and make sure the team has strong analytical capabilities and data-driven, cross-functional decision making processes in place. This way you can achieve the necessary operational excellence, step by step. Do not let your IT team stick with old solutions and systems, which they are accustomed to “playing” with. IT must be pushed outside their comfort zone. Your IT function needs to support nimble applications and platforms that enable data collaboration, analytical decision making and leverage back end systems cost-effectively. 

3. It's a joint program, set KPIs for the entire organization

Make good incentives to your supply-chain personnel to work ensuring the most value for your business while protecting against its risks. Be creative, don’t use the traditional metrics of cost, service, and capital. The right key performance indicators strongly depend on the needs of the business, the product, and the target market segment and audience, as well as the total cost of production for value players, the stability of supply for basic and critical products. The agility in volatile markets with highly fluctuating demand, and product launch excellence in accordance with new products are very important and useful data. The metrics and KPIs will help direct the team and its function. Do not misdirect the organization by using metrics that lack importance. With the tech-savvy team, it’s easy to set up pertinent metrics. Keep it simple and crystal clear.

The industry leading companies have transformed and developed their supply chains with time, investment, and sustained top management involvement. Are you going to enable your supply chain to be a powerful source of competitive advantage?

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