4 Methods to Improve Supply Chain Efficiency

4 Methods to Improve Supply Chain Efficiency

For organizations to remain competitive in the global marketplace, continuous supply chain improvement and supply chain efficiency are required. A firm must be hyper focused on reducing waste to generate cost savings and reduce risk in its supply chain. However, many firms approach this task from an angle that doesn’t produce sustainable results and may even produce unintended consequences. As a company grows organically and pivots strategies in search of profit centers, its supply chain will often reflect this.

While this strategy is important to the growth of an organization, it locks inefficiencies into the supply chain because it favors speed over efficiency. However, as a company scales and stabilizes, these inefficiencies become significant disadvantages, and it takes more than incremental change to remove them.

4 Methods to Improve Supply Chain Efficiency

To truly reduce waste and mitigate risk in your supply chain you’ll need reinvent it, from the ground up. We suggest focusing your team’s efforts using the four methods discussed in the paragraphs below in order to improve your supply chain efficiency.

1.  Imagine a New Supply Chain

A great starting point is a simple exercise. Ask your team this question: “Knowing what you know now, with infinite resources, how would you design our supply chain?” Forget about specific suppliers and capability restrictions, this question is focused on the highest process level and helps your team focus on the big picture.

With this as your starting point, begin to drill down on each process. Keep pushing on what the optimal, most efficient, supply chain structure is considering market conditions and resource availability. As your team continues to peel back the proverbial onion, they’ll start to reach something that resembles the optimal supply chain structure. From that point, brainstorm with your team about what the steps necessary to pilot the optimal supply chain structure on a small scale would look like. Once the structure and strategy are formed, work with your team to understand the steps necessary to extrapolate the pilot program results on a larger scale.

2.  Partner with Your Current Suppliers

Sometimes the supply chain challenges facing a company are market wide, and developing effective solutions require the kind of scale not available to a single partner within the value chain. Situations like these present perfect opportunities to develop deeper partnerships with your suppliers to help grow each of your businesses.

Creating a mutually beneficial strategy can be tricky, but it’s doable with careful planning. When approaching this arrangement the focus should be on clearly defined, revenue sharing-based and easily trackable KPIs, and information transparency. Furthermore, it’d be entirely appropriate to develop a coalition charter that outlines the arrangement in detail.

Executing this successfully will allow your firm to tackle supply chain inefficiencies at a scale beyond your current capabilities.

3.  Collaborate with Internal Operations

Sometimes there isn’t a need to build a supplier coalition because the risks and supplier capital needed for success outweigh the benefits. In these instances, significant supply chain optimization may be possible through interoperation collaboration throughout the entire firm.

Similar to the previous strategy of imagining the ideal global supply chain, imagine a brand new internal supply chain. Follow the same approach to help you identify a new internal process that reduces waste and promotes efficiency. During this activity, focus on areas that have overlapping resources. By evaluating these key areas, your team can identify redundant processes that waste resources and illuminate large scale process changes that will radically improve your firm’s operations and bottom line.

4.  Drive Large Scale Efficiencies with Your Supplier’s Suppliers

After you’ve partnered with your suppliers to develop efficiencies, there’s a great opportunity to leverage the same partnership to drive efficiencies for their suppliers. Achieving this level of collaboration will not only give you greater insight into your supply chain, but will also grow your ability to drive large scale supply chain improvements.

However, gaining this level of influence is challenging. To be successful special attention must be paid to aligning incentives throughout the entire value chain. Simply put, suppliers will be willing to improve a given relationship if it improves their situations. These types of far-reaching partnerships may not improve your financial standing on paper, although they might significantly reduce your risk exposure, which could be much more valuable in the long run.

– Chris