The U.S. business logistics costs over one trillion dollars a year. According to a report from the Council of Supply Chain Management Professionals that is seven percent of the country’s gross domestic product (GDP), which is a large number compared to the GDP of other countries (e.g. Mexico).
The numbers prove that the financial health of the American economy AND your business depends on a network of smooth-running supply chains. In terms of your business, your supply chain is a crucial part of your inventory management and business strategy. An efficient supply chain improves customer satisfaction and saves you more money by reducing the waiting time for your products and services.
On the other hand, an ineffective supply chain can immediately drain your resources, so it’s important to be strategic with your supply chain, making sure it remains lean and cost effective. Whether you’re offering residential cold chain management services or simply studying your business’s logistics, use the following strategies to your advantage.
Evaluate Your Suppliers
Your suppliers are the beginning of the supply chain. So start your work toward improvement by evaluating your supplier relationships in terms of the following:
- Suppliers should be reliable. If your current supplier often shorts you on your order, fails to follow through their promises or ships orders late, it will negatively impact your supply chain. Instead of staying with this type of supplier, cut ties with them since they have proven themselves as liabilities. Check out supplier listings on websites like Alibaba to find a new supplier that is capable of meeting your needs.
- A business-supplier relationship without good communication is bound to fail in the future. Instead of facing damage, analyze the effectiveness of your communication with your current suppliers. Do you understand each other easily? Do they answer your emails on time? Or are you wasting time by re-explaining the same thing repeatedly? The best suppliers are always responsive. The last thing you want is to experience a loss on goods you can’t sell just because your vendor wasn’t prompt with their response.
- If you want to maximize your supply chain, consider the speed of your suppliers when it comes to completing your orders. If your supplier takes more than a week to finish production, you may end up re-ordering products to avoid losing stocks. When you don’t have stock for galvanized sheet metal, for example, you’ll be unable to meet the demand.
See if Your Supply Chain Strategy Needs to Change
Rethink your strategies and goals when reviewing your supply chain costs. A change may be necessary, but make sure those changes don’t compromise your processes.
Address these two main points:
- How strong is my supply chain strategy? The pandemic has proven to be a good test for the strength of any supply chain. Those that didn’t have mechanisms in place experienced a disruption that likely threatened their growing business. Improve your current supply chain’s resilience by choosing logistics companies and backup vendors that have the capabilities to address your shipping or supplier needs.
- Is my current strategy appropriate for my business type? Your strategy should suit your current business model. For instance, if your business strictly operates online, add dropshipping to your strategy. On the other hand, if you have a business-to-business model, switch to a wholesale model to improve the supply chain.
Monitor Your System
Just because something is working well today, it doesn’t mean it will work forever. The best supply services are prepared well when their supply hits an unexpected low.
Inventory management services include logistics and supplier management platforms, enabling you to root out problem areas in your supply chain.
Always monitor your supply chain. At least once per quarter, check your current supply chain’s performance. Are there any patterns? Are you seeing an uptick in terms of the quality of your products or orders?
Once you’ve identified where your problems are from, determine the next step to improve your supply chain. You might have to implement better training for your warehouse staff, try out a new shipping service or work with a different vendor.
Use Demand Planning
Using historical demand data can help you determine the potential demand for your products. Spare yourself the headache by implementing demand planning to improve your supply chain.
For example, if you know that a certain type of your sunglasses will sell well during October to November, make sure your supply chain partners to ensure have adequate supply for these months.
The Bottom Line
When your current supply chain performance isn’t delivering on goals, don’t give up. Building a better supply chain, find better suppliers and improve the flow of information to strengthen your business for whatever comes.