Optimising your supply chain is one of the ways you can improve the efficiency and profitability of your facility. The best approach to achieve the best results is to deploy a strategy that cuts across every stage, starting with product design and the sourcing of raw materials and components. Supply chain optimisation is one of the easiest and most effective ways to enhance the experience for customers and other stakeholders of your facilities.
What is Supply Chain Optimisation?
Supply chain is basically the activities a manufacturer undertakes to improve the efficiency and cost-effectiveness of their supply chain. This can include measures such as reducing material waste, improving insight on regulatory risks, coming up with better backup strategies for unexpected part sourcing issues and improving the delivery speeds and accuracy for different products and parts.
At its most basic level, supply chain optimisation can be defined as the effort of maximising profit while minimising costs.
For manufacturers to achieve supply chain optimisation, they must overcome various challenges such as geopolitical instability, trade conflicts, port congestion, labour strikes, worker shortages, and delays in cargo shipments. These challenges can be global, while others can be within their operating locations.
Benefits of Supply Chain Optimisation
Optimising your supply chain can lead to many benefits for your operations, including lower costs, higher profits, improved product quality and most importantly, satisfied customers. Other benefits of supply chain optimisation include:
Improved supply chain ecosystem
Optimising your supply chain will directly impact all the people involved in the designing, manufacturing, storing and moving products from the beginning to their delivery to the end customers.
The first step of supply chain optimisation should be a comprehensive audit of each stage and partner to identify loopholes, lapses and possible problem areas. The audit will measure the value of specific vendors and service providers and any possible opportunities to bring other vendors on board to fill in the gaps. This has a positive impact on the supply chain ecosystem.
Improved quality
One of the outcomes of an effective supply chain optimisation is the direct impact on product quality from the beginning of the production process, when the raw materials are produced, down to delivery. Supply chain managers should optimise their supply chain to adhere to quality standards at each stage and keep up with industry regulations. As a result, the quality of the final product is significantly improved.
Reduced costs
Interventions involved in the supply chain optimisation process, such as inventory control, can present significant cost reduction opportunities. Additional measures such as inventory tracking and product storage can also help the manufacturer reduce their operational costs by reducing overproduction and unnecessary storage costs.
Increased revenue and profit
The bottom line of supply chain optimisation is to boost revenue and increase profit. There are many places along the supply chain where manufacturers can increase efficiency and lower costs, consequently boosting their profits.
Better planning, reduced inventory holding costs and more responsive customer fulfilment processes are some of the supply chain optimisation interventions that can help boost revenue and profit for the manufacturer.
Improved supplier performance
One of the oldest sayings in business is that you can’t improve what you can’t measure. When setting up your supply chain optimisation goals, you need to start by evaluating suppliers based on set KPIs, which may include on-time delivery ranking, material defect rates and payment period for production materials.
You may need to work with each supplier on the areas where they fall short to improve their performance and consequently improve your performance and delivery. These audits can lead to increased supplier performance because you’re more likely to favour suppliers that offer more favourable services, deliveries and billing.
End-to-end supply chain visibility
One of the tools that many manufacturers rely on when trying to optimise their supply chain is technology. Not only does incorporating tech simplify processes, but it also helps to view and digest data more robustly as opposed to everything being in its own silo.
The ability to view and interact with data differently also helps to create that end-to-end view of the entire supply chain, which is essential for any company that intends to keep improving its supply chain.
Supply Chain Optimisation Techniques
There are different methods and pathways that manufacturers can adopt when looking to improve their supply chain optimisation. Also, the process has different stages that must be carefully executed to deliver positive results.
Cost optimisation
Under cost optimisation, companies can use methods such as just-in-time manufacturing to ensure they just produce enough to meet demand without missing any sales or orders. As such, the company cuts back on costs such as storage.
They can also achieve more cost savings from factory automation, reducing material wastage in the production process and choosing to work with lower-cost suppliers. These are some of the cost optimisation measures that can be adopted.
Inventory optimisation
This process involves manufacturing precise amounts of products needed to meet customer demand. Carrying too much inventory has its downsides, including increased storage costs and waste, while too little inventory can cause the manufacturer to miss out on sales. Inventory optimisation can strike a balance by ensuring you have just enough to meet demand while cutting back on your storage costs.
Network optimisation
The third approach to supply chain optimisation is to identify the best locations for factories, warehouses and distribution centres. There are optimal flows between those locations with the goal being to control costs and increase reliability and the flexibility of the supply chain in case of disruption.
Ways to Optimise your Supply Chain
When working to optimise your supply chain, your sole goal should be to enhance end-to-end visibility into every stage of the supply chain. This will allow your supply chain managers to act because they can see where the bottlenecks are and how to manage them.
Forecast and plan ahead
Your first goal in supply chain optimisation is to align production, storage, and transportation with product demand, ensuring the right amount of inventory is available at the right time. You don’t want too much product on hand, which raises storage costs, and too little that you run the risk of not meeting demand.
Everything from the location of the warehouses and production facilities to the availability of raw materials and the location of customers should be data-driven. Manufacturers can use SCM software combined with third-party data such as weather reports or regulatory changes to plan and forecast demand and predict potential disruptions and supply chain constrictions.
Outsource where necessary
If the cost of production at your location is high, you can turn to contract manufacturers to lower costs and help you penetrate new markets. You can partner with manufacturers in locations that allow quick shipment to drop centres and to customers.
With contract manufacturing, you can also adjust your production capacity up and down based on demand with minimal cost implications.
You can also consider the use of 3PL providers, which can also help you optimise various aspects of your supply chain, such as warehousing and logistics, and scale them up and down based on your needs.
Build supplier-retailer relationships
You need to establish supply chain partnerships with other stakeholders, such as manufacturers, distributors, retailers, and suppliers, to make informed and timely decisions, especially during disruptions and demand fluctuations.
One of the ways to build these partnerships is by using integrated systems that provide real-time information and using networks that have multiple participants. The better the collaboration you have, the smoother and more efficient your supply chain becomes.
Invest in technology and automation
One of the best ways to optimise your supply chain is to automate routine tasks and employ machinery and equipment that make these tasks easier, such as using Automatic Guided Vehicle carriers or warehouse trolleys that make moving products and materials across the warehouse, production floors or loading the lorries easier and more efficient.
Using autonomous vehicles for delivery can help to improve safety and efficiency, improve performance while reducing human intervention and allowing your staff to focus on other critical functions of the facility.
Other potential avenues you can use in your quest for supply chain optimisation are to renegotiate contracts with your suppliers to improve prices, quality and timelines of delivery to help you improve production and delivery. You can also consider renegotiating accounts payable terms to make them more suitable for you.
Closing Remarks
Supply chain optimisation can help a business turn around its fortunes by cutting down on its expenses without losing customers. Executed the right way, supply chain optimisation can help manufacturers improve service delivery and customer satisfaction, helping them build a wider customer base. While some of the movements are administrative, adding handling equipment such as suitable trolleys and AGVs can also help streamline operations and shorten turnaround times.
