5 Tips To Improve Your Supply Chain Management Process
The supply chain is the flow of materials and products through all the stages of production. Supply chain management, also referred to as SCM, is the process of overseeing and controlling those goods and resources. Supply chain management is an essential component of every manufacturing company as it affects quality management, inventory, and operations management, helping to make a business competitive in the industry.
Supply chain management requires clear processes that help leaders and managers stay in control and make the most of the available resources throughout the supply chain. Improving the supply chain management process helps improve customer satisfaction and the company’s return on investment. In this article, we’ll go through five tips that you can use to build a more effective supply chain management process.
The Sourcing and Procurement Challenge: Global Supply Chains Are Changing
There have been some recent major changes in the global supply chain as a result of a very challenging couple of years. The impacts of the COVID-19 pandemic have had long-lasting effects on the flow of materials across the globe. Most of this stems from mandatory and voluntary factory shutdowns. Because factories were operating at a lower capacity than previously, distributors could only produce a certain number of goods and materials — all of which were in high demand by many companies to restore the flow of resources.
While restrictions have lifted and businesses are mostly back to normal operations, there are still significant backorders, disruptions, and limited sources to procure new materials from. And, because the global supply chain is all connected, an impact in one area has a ripple effect on the rest of the chain.
Because demand is high and resources are limited, there is also a rise in the cost of procuring goods and resources. It is becoming more and more difficult to source raw materials needed for manufacturing production. This means that manufacturers must reconsider their supply chain management process to adapt to today’s changing supply chains and find areas of improvement to capitalize on.
Case Study: Semiconductor Shortages Impact Automobile Industry Profitability
We can see the impact of the global supply chain on the semiconductor shortage that is impacting the auto industry and its profitability. Semiconductors are small chips that enable different car functions, like interior lighting, blind-spot detection, and seat control. While a small chip might seem like an insignificant part of car design, the shortage made people across the globe aware of just how valuable they are to the industry.
The shortage occurred for a few reasons. First, orders for semiconductors were cut in early 2020 as sales were plummeting and auto manufacturers needed to cut costs. When the demand rose later in the year and auto manufacturers needed them again, the production lines and distribution centers had already shifted to other products. Another reason for the shortage was the long lead times for semiconductors. Even after increasing capacity, the complicated process and licensing limitations made it difficult to fill orders, leading to the continuing shortage.
The manufacturing of one small part has led to significant complications in the auto industry, namely a lack of inventory for sale as new cars can’t be built without chips. Dealerships are struggling to get the cars they need to sell, and consumers are finding that both new and used car prices have risen significantly. All of this helps us understand how sensitive global supply chains are. However, the profitability of semiconductors has increased considerably, as the demand means that pricing has increased. This tells us that when the supply chain goes through changes, some businesses profit, and some suffer.
Why Improving Your Supply Chain Management Process Is Important
As the supply chain continues to change, adaptability is becoming a more important virtue for manufacturers. Companies should seek to improve their supply chain management processes to:
- Create a more agile business that can adapt to supply chain network changes.
- Create better relationships with suppliers.
- Get better quality control with products and raw materials.
- Improve shipping and warehousing.
- Reduce inventory and overhead costs.
- Improve risk mitigation in the organization.
- Create a stronger cash flow.
- Get better visibility into the business with data and analytics.
Tracking metrics is a great way to get a current benchmark for the SCM you currently have in place. Inventory waste, product quality, and operational effectiveness are just a few metrics that can help you see how supply chain management impacts your business’s success and profitability. For example, low product quality may signal issues within the supply chain, such as low-quality raw materials. If the low quality continues, it could have lasting negative effects on your profitability.
5 Tips To Improve Your Supply Chain Management Process for a Distinctive Competitive Advantage
Now that you understand the recent shifts in the supply chain and why supply chain management is essential to your organization, let’s look at five tips for improving your SCM processes and building a distinctive competitive advantage in your industry.
Tip #1: Start With the 5 Basic Steps of Supply Chain Management
The first tip is to look at the five steps of supply chain management and see how to make improvements in each area. These five steps guide your entire SCM process, so knowing how each one impacts the overall flow is important.
Step 1: Plan
The planning step involves matching your supply with the demand for your products or goods. Production planning and demand planning help you understand what goals you need to set to meet customer demands and what investments you need to make to achieve those goals. Improving your planning involves looking at your warehouse space and inventory spending.
Step 2: Source
The sourcing step refers to the process of finding sources of raw materials and products that your manufacturing processes need. Improving your sourcing might mean looking at your supplier relationships and seeing who delivers on time, who has the best quality resources, and if you can merge suppliers.
Step 3: Make
The making phase involves the assembly, creation, testing, and packaging in your factory. You create the final products that you then deliver to customers in this step. Improving your production processes can involve looking at your machines and equipment, operators, run times, and outputs.
Step 4: Deliver
The delivering step is where you get your finished product into your customers’ hands. This step provides customer feedback on their needs and satisfaction levels, which gives insights into how well you deliver on your promises. Listening to this feedback can be beneficial in improving your delivery processes.
Step 5: Return
The final step in the manufacturing lifecycle is the return step, where you have channels for damaged, low-quality, or otherwise unsatisfactory products to be brought back to you. This is also important in increasing customer satisfaction and providing great customer service. To improve your return process, take a look at your available return methods. The easier the returns process is, the more satisfied customers will be.
Tip #2: React to Supply Chain Challenges in Real Time
The changes to the global supply chain and logistics management happen quickly. To successfully adapt to those changes, you need to have real-time reactions to the challenges. Different types of technology can help you become more adaptable, identify supply chain risks, source new suppliers, and evaluate your top-performing suppliers. Types of technology that can help include:
- Supplier management software
- Enterprise resource planning (ERP) systems
- Order processing tools
- Demand forecasting platforms
- Warehouse and inventory management tools
Tip #3: Eliminate Information Silos
Information silos occur when there isn’t a single source of information for the company to use. When you run across different systems and don’t have a centralized database, the resulting lack of cohesion can increase miscommunication between teams. Information silos can also lead to increased errors, incorrect reporting, and general confusion across your organization. Synchronizing short-term operational planning with wider business processes can help keep everyone on the same page.
To create a steady stream of shared real-time data, you can try investing in a solution that provides a single source of truth or use integrations between your platforms like ERP and supply chain planning software.
Tip #4: Monitor Trends and Integrate Supply Chain Technology
Another tip for improving your SCM processes is to stay up to date on emerging trends and advancements in supply chain technology. Some of those trends include:
- AI and machine learning: The rise of AI, automation, and machine learning helps supply chain managers optimize forecasting based on historical data and create predictive models that help regulate supply while predicting pricing and gathering marketing intelligence.
- Regulatory challenges and security risks: Software and technology can help organizations plan for regulatory challenges and increased security risks by building adaptability into blockchain processes.
- Supplier relationship management: Even as technology advances, relationships with suppliers remain valuable to manufacturers. Software and technology make it easier to keep up with supplier partnerships and source new providers if a supplier isn’t meeting demand.
Tip #5: Understand the Strengths and Weaknesses of All Supply Chain Management Processes
There are many areas of the supply chain, and trying to improve them all at once isn’t a realistic supply chain management strategy. Instead, it’s a better idea to look at the critical aspects of the supply chain and pick a few to focus on.
One way to narrow down your selections is to look at different supply chain factors and see which are areas of strength and which are areas of weakness. If you know where your weaknesses are, you can prioritize your changes and ensure that your efforts are going into the right areas of the supply chain. Those different areas include:
- Customer relationship management
- Customer service management
- Demand management
- Order fulfillment
- Supplier relationship management
- Supply planning
- Capacity planning
- Inventory management
Enhance Your Supply Chain Management Process With Anvyl
Supply chain management is an integral part of your manufacturing process that helps you stay on top of the incoming supplies and raw materials that make up your products. When you have a strong supply chain management process, you can increase customer satisfaction and ensure that you get the most out of your investments in supplies.
Anvyl can help you streamline your processes, including your supply chain management. Anvyl provides you with a central source of truth for all of your data and manufacturing information to help you improve supplier relationships and get a stronger sense of confidence in your supply chain. Learn more about about supply chain management integration, or get a demo of our platform to discover how Anvyl can help you improve your supply chain management.
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