A business runs on hundreds of functions and processes done together. As a business owner, you are responsible and liable to understand these functions and processes to keep your business up, running, and profitable.
Supply Chain is not a business function but a strategic approach. A business needs suppliers. A supply chain is a formal strategic approach of conduct between an organization and the supplier of the goods required by the organization. A well-recruited supply chain can maximize the production value across all stages of the cycle, which is definitely the prime goal of creating a supply chain.
In the US alone, the cost of logistic business covers 7% of the GDP of the nation, which is equal to 100% GDP of Mexico and is more than 50+ counties. This means, that to survive and excel with your business in the US economy, your business requires a smooth supply chain to ease out network and business channels.
Supply chain planning is done considering a lot of elements. The supply manager requires to keep a balance, resilience, efficiency, clarity, and effectiveness in the supply chain strategy created.
There are multiple folds for you to understand about supply chain and how to strengthen supply chain strategy. This article has covered it all to help you out. Read it through but let’s begin with the basics.
What will you find in this article –
- What is Supply Chain Strategy?
- Why Do You Need Supply Chain Strategy?
- Ways to Strengthen Supply Chain Strategy
- Optimize Inventory Management
- Place Checks and buffers along the Supply Chain stages
- Enhance Logistic System
- Recruit Supply Chain Supervisor
- Analyze the Demand Predictions
- Involve Technology
- Work on Supplier Relationship
- 4 Major Benefits of Using Improvised Supply Chain Strategy
- Spike in Productivity
- Reduced Risk
- Innovative and Creative
- Investment and Not a Cost
- Examples of Supply Chain Strategy
- Data for Forecasting the Future Need
- Discount Clothing Tariff Bringing in a Check
- Key Takeaway
What is Supply Chain Strategy?
A supply chain is a chain of processes that makes the entire process of supply and delivery as smooth as possible after eliminating all the possible obstacles in the way. The chain begins from the first phase of sourcing the goods and raw materials, till the end phase of logistics and delivery.
The world market has changed its course rapidly over the past couple of decades. The dynamics of profits and money-making have shifted to satisfying the customers with quality while making a fair share of profit for the company.
What most companies ignore is the “Amount of Capital and Resources” being used in logistics alone. It cuts the profits by a major number. Customer satisfaction can become an issue as well when the right value, information, and support are not provided.
This all happens when there is a lack of an efficient and enhancing supply chain strategy, or because of an absence of a supply chain all together.
Here are some factors influencing a supply chain strategy –
- The Industry of the company
- Value of the company proposition
- Decision-making dynamics of the company
- Target and goals of the business
Why Do You Need Supply Chain Strategy?
A strategic planning process eases out the entire running of an organization. A supply chain when planned strategically does just that and much more. Here are some of the most important aspects of a supply chain that can prove to be a great help for a business organization.
- It acts as one of the most important external instruments of analysis in a business.
- With the help of a simplified and transparent strategic supply chain, a business is able to mark its customer cluster and market with focus and clarity.
- A strategic supply chain helps a multi-tire corporate organization in understanding whether the business needs to be diversified in multiple markets with multiple products and services or not. The selection of profit-making channels can be sorted out with a fine supply chain.
- An organization deals with multiple different industries at each stage of the supply chain. With the help of a strategic supply chain, understanding and gaining expertise in each industry becomes possible.
- This way, a company is able to make the decision if it wishes to enter a new industry or not.
Yes, a company needs a strategic supply chain to enhance its business process. However, most companies lack in building a strong supply chain.
The supply manager may have expertise and experience, but if the supply chain has the absence of strengthening factors, it will never be effective enough to achieve the prime goals. Here are the aspects to strengthen a supply chain for more effective and efficient processes.
Ways to Strengthen Supply Chain Strategy
If you think your supply chain falls vulnerable when it comes to carrying out the processes, here are some additions you can make to the chain.
Optimize Inventory Management
Ill-treated and mismanaged inventory is a part of almost every business. While from the outside it may look like a treasure, it is impossible to deal with it when the need arises.
Managing inventory is necessary for a major number of reasons. Keeping what is needed and discarding what is not is the right way to manage it. Keeping inventory mismanaged can prove to be a reason for loss for a company because
- Cost of storing inventory is extremely high.
- Storing costs can alone be up to 60% of the cost of the goods.
- In the time of need, finding the right goods can be difficult
- Unawareness of availability and unavailability of the required good
- Wasting human power each time on sorting inventory-related problems.
Introduce inventory management systems like records, entry keeping, regular manual, and technical checks, etc. Deskera is an efficient and easy-to-use inventory management system that helps you solve most of your inventory management troubles.
Place Checks and buffers along the Supply Chain stages
The mechanism of the code of conduct changes in every stage of the supply chain. The human resources working in the supply chain change from one stage to another. The record-keeping changes from one stage to another.
This way, there is a high chance of losing the track of the end goal of the supply chain. The easiest way to cross obstacles is by placing multiple checks and buffers throughout the multiple stages of the supply chain.
By placing multiple checks a sync is built between the processes and the employees handling all these processes. This saves the organization from mishappenings at the end stage.
By placing time and inventory buffers, the deadlines can be met without the slightest of delays. With inventory buffers, the organization will always have more inventory than needed in the present for urgent deliveries in the future. With time buffers, the process will take place in time, this way there will never be delays or missing deadlines from the organization’s end.
Enhance Logistic System
Logistics and deliveries may be the end stage of the process but it is one of the most important parts of the entire supply chain. Managing it right is one thing and enhancing the entire logistic system is what brings efficiency to the process. Here are two ways you can introduce to the logistic system for better efficiency.
Group Approach – Make groups of information papers, graphs, charts, and other documents into groups based on the similarity of nature. This helps in understanding the process and provides what is lacking. It also helps you see the functioning of the company closely.
Review and Access Approach – Take a holistic approach here. Access and review all the vital components of the logistic system and the network. It will also help the employees understand how the network and the essential components play their role in the logistic system.
With these approaches, the employees will have clarity of the process and the speed of delivery will shoot up. The chance of errors will be cut down.
Recruit Supply Chain Supervisor
A supply chain is a long process that goes through multiple stages. While each stage has a manager it is important for the entire supply chain to have a supervisor too. Here is the benefit a supply chain supervisor can add to the supply chain.
- The supply chain supervisor will come with experience that the books don’t teach.
- The supervisor will have the skills to increase the effectiveness of the supply chain.
- The supply manager can bring multiple stages in sync if there is a gap.
- The supply manager can introduce a strategy to enhance the working of the supply chain, ultimately increasing the revenue and profits for the organization.
- A supply manager will not only take care of the functioning of the process but can also help the struggling employees in upskilling and understanding better.
Analyze the Demand Predictions
A lot of companies completely ignore the need to see future demands. The focus stays on the current market and current demands in the market. This can become an obstacle to the growth and diversification of the company.
Forecasting plays a major role here. This forecasting is entirely done based on the data retrieved after market research. The company pulling out the research can forecast the future demand in the industry they are working in as well as in the industry the company can step into to diversify.
Forecasting helps the company is pulling out security at the right time. In case, in the future, the demand for the product the company deals in is going to go down or disappear completely, the company has to start with a new product right away to bring profits in the future.
The data for the prediction can be retrieved through multiple channels like monitoring social media channels, surveying customers, reviewing previous data and trends, or soliciting advice from a consultant.
The world is all about technology. While manual methods of function, data recording, planning, execution, bookkeeping, etc are possible, human error is always a possibility.
When done manually, work takes more time and is always less efficient. Technology solves all those problems.
From recording inventory, keeping a check on employee attendance and salary payments, bookkeeping, invoice generation, inventory check, documentation for deliveries, payment reminders for the customers, and a lot more are needed to be done in the day-to-day business of an organization.
When done manually, these tasks take a lot of time and a lot of manpower. Today there are hundreds of tools available in the market that can help an organization in doing all these tasks with just a few clicks.
Deskera Books is one such software that offers all of these services in a single software and saves the organization from jumping from one to another software for each task.
It is efficient, error-free, and extremely comfortable. It also keeps track of future tasks of the same nature and helps the organization out with reminders and saved templates.
Work on Supplier Relationship
A supply chain is not just about getting the tasks done, it is all about getting the process run as swiftly and obstacle-free as possible.
A major part of a supply chain is to build a network with suppliers. A lot of companies neglect the impact of good relationships with the supplier network.
With great relationships, the supplier pays better attention to your company and ensures the relationship, as well as the supply, is never of question on their end.
Introduce strategies to establish and cultivate good relationships. Even after the contract is over, ensure that there is a certain touch and relationship between the company and the supplier for future purposes.
This will not only ensure the company good quality supply and a great network, but it will also establish goodwill for the company in the industry.
4 Major Benefits of Using Improvised Supply Chain Strategy
Introducing Improvisation in your existing supply chain strategy can eliminate all the factors that are slowing the process down. This is not just a perception but a proven approach. Here are 4 major benefits of an improvised supply chain.
Spike in Productivity
According to a survey taken in 2020, supply chain supervisors and leaders noticed a huge spike in productivity. The spike did not just happen with one strategy put to use but with the right combination of multiple strategies to facilitate the process.
While the productivity increase was major, 93% of participants of the survey mentioned that they used inventory increasing strategy and multi-sourcing strategy which brought great results.
A business is all about taking risks. But the risks should not be involved in running the company or in the supply chain process. There is no such thing as “Risk-Free” in the business world. However, it is possible to cut down the risks when using the right strategy.
A complex and mismanaged supply chain makes the organization weak and subject to errors from within. At the same time, the company also becomes a subject of problems with factors that are not in the control of the company.
By using improvisation strategies the company can eliminate the obstacles that might fall in the way. The strategies will make the supply chain more sustainable and less prone to risks when it happens from within or from outside factors.
Innovative and Creative
Supply chain supervisors and leaders are appointed there for a reason. Coming with experience and the appropriate knowledge required, the leaders have the freedom to use creative and innovative ways to introduce new strategies in the supply chain. To make the supply chain more resilient, the leaders can introduce the use of technology and automated processes.
According to the stats, the companies that use innovative approaches with technology and animating have witnessed a drop in manufacturing and production time by 60%. On average the companies were also able to increase their output by 25%.
These results come with resilient supply chain strategies. To use these strategies, the leader has to be mindful, analytic, and ready to accept the change that is a must to enhance the processes of the supply chain. In the end, these strategies are proven to help the company with growth by a good number.
Investment and Not a Cost
Profit-driven organizations are always a little skeptical when it comes to money. Spending an organization’s money takes multiple approvals.
The mistake here that the organizations make is that they count the money spent on enhancing the supply chain is counting as a cost. Money spent on enhancing the supply chain is not a cost but an investment that is going to bring out great results in the future.
The money can be spent on hiring experts when it comes to the supervisor role. The money should also be spent on buying technological tools and software.
The goal is not just to use a supply chain and barely survive, the goal is to make a resilient supply chain, eliminate all the existing and predicted troubles, increase the positive numbers, and build a network. This is why investing money in the supply chain is the right path to take.
Examples of Supply Chain Strategy
Only reading the ways that can strengthen your supply chain is not enough. You need to see how it works in real as well. Here are a few real-life examples that will help you understand how introducing new strategies to your supply chain can make a difference.
Data for Forecasting the Future Need
A medical company called MediPlus concentrated on a future-focused supply chain strategy beginning in the year 2015. With this, the company invested in forecasting future needs and demands with the help of well-researched data and numbers. With the right strategy put to use, the company was able to crunch the numbers for the future.
With the right numbers, the company was able to reduce the inventory that would not prove to be in high demand in the future. The company also cut down on warehousing and transportation cost with the right metrics. The company increased the inventory that would prove to be of the right use in the future and this way they were able to crunch the profit numbers in the future.
This not only help the company in increasing its profit and expanding in the market, but by introducing the right inventory at the right time, the company also earned the right goodwill in the market.
Discount Clothing Tariff Bringing in a Check
Mike’s discounted clothing company was doing great in the market. The company would outsource the fabric from China, tailor the clothes in the USA, and then sell it in the market at amazingly affordable prices.
The tariff charges however do not always remain the same. The taxes on fabric increased in China and that would impact the manufacturing cost and the profit margins for Mike’s company. Continuing trade from China meant a 35% - 40% hike in the cost being paid alone for the fabric.
Considering the same, the company changed its supply chain strategy and focused on cutting the terrifying price. The company eliminated China as the source of fabric right away, bought the fabric from a different source, and was able to continue selling clothes with their USP which was clothes at a cheaper price.
This could happen because the company took the right steps at the right time and had a strong network of suppliers. They were saved from wasting more time and money because of the lack of suppliers at the right price. The networking proved to be of the right use and the company was saved from getting into an inconvenient process.
How Can Deskera Help you?
Deskera Books will assist in inventory management, automate inventory tracking and their insights. It also have backorder management which will ensure that you never fall short of any inventory. Deskera Books will also help you to keep a track of your outstanding account receivables and account payables, hence ensuring you have a healthy cash flow.
Deskera can assist with customer relationship management, human resource management, attendance management, and payroll administration.
Try Deskera to alleviate your business workload. For a range of sectors, use free, downloadable, and customizable invoice templates, automated invoicing, billing, expenses, payments, accounting, inventory, recording all deposits, and much more.
Correct strategies put in a supply chain can turn around the results for good. While some organizations may ignore its importance, we have mentioned everything a company can do to retrieve the best results out of the supply chain it is using.
Here are some of the key takeaways from this article you need to keep in mind when you are thinking about improvising your supply chain.
A supply chain is not just about manufacturing and supplying, it is also about making a healthy network in the industry.
Enhancing the supply chain is not just an added benefit, it is vital if you wish to retrieve the greatest results out of the process.
Investing money in technology and automation for the supply chain can prove to bring a major change in the process and bring more advantages.
The supply chain supervisor is important to have the right knowledge of the process, understanding of the use of technology and strategies, and relationship-building power.
Be creative with the strategies introduced. Not everything always has to be by the books. Make the innovations required to get the best results possible.