8 Reasons Why Supply Chain Optimization is Good for Business

October 21, 2020

As we continue to evolve operational efficiencies to adapt to challenges created by the coronavirus pandemic, one thing is becoming ever more clear for businesses of all sizes: the value — and complexity — of our supply chains.

For many, supply chains have always been part of business continuity planning. But few, unfortunately, anticipated the scope and speed with which this outbreak would impact supply chains around the world.

Here are some of the many negative impacts supply chain disruptions can have on your business, according to a 2018 survey by the Business Continuity Institute:

  • Financial losses (62%)
  • Logistics issues (54%)
  • Impact on your brand and reputation (54%)

But there is an upside. Supply chain management is now front-and-center for many executive teams. It’s a component of not just survival now, but scalability and success for the future.

Now’s the time to take advantage of the focus on supply chain management while you have everyone’s attention. Here are 8 suggestions to help you optimize supply chain management today so you’ll be better prepared for disruptions and changes in the future.

Understanding Your Vendor Needs

You can’t optimize your supply chain without first understanding its role within your company. To begin, you should make a list of all of the parts, products, and services you get from third-party suppliers.

Traditionally, when we think of suppliers, we think of tangible things, like the resources we need to make our products or the products we purchase and resell to our clients. But today’s supply chain is much more complicated. It also includes the digital services we get to do business. That can be anything from your human resources systems and payment processing software to your third-party point of sales.

This list should not just include what you get from suppliers, but also who the suppliers are and where they are located.

Remember, you’ll need a complete inventory of all of your suppliers. Don’t just list the ones you have current contracts with (although be sure to include them). Often, as relationships exist over long periods of time, some of the standardized processes we have in place like contract renewals fall by the wayside and we continue to work with some of our favorite vendors as a matter of routine.

An enterprise resource planning (ERP) solution is a great way to build and manage this list. It will play an important role in your supply chain success as you move forward.

Understand the Impact

Once you’ve created your list, it’s time to do a business impact analysis (BIA). Here are some important questions to answer:

  • What are the most critical supplies and services you get from third-party vendors?
  • Which suppliers provide these most critical services for your business?
  • What would be the impact on your business if you experienced a delay or disruption of services from your supplier?
  • Are you currently experiencing any issues of concern with these suppliers? If yes, what are they and can these issues (or risks) be mitigated or do you need to consider an alternative source?
  • Are any of these vendors located in regions prone to disruptions (think geopolitical, weather, economic, etc.)?

Eliminate Single Source

In a good business sense, most of us know we should never rely on one supplier for our core parts and products. That’s been a hard lesson to learn for many businesses during the coronavirus outbreak.

Unfortunately, as processes change and people move in and out of a business, quick and often cost-saving decisions are made — and sometimes we end up with a single source for some of our most critical components. When that happens and we experience even minor or isolated disruptions, it can have far reaching — even devastating — impacts on our operations.

As you go through your critical services inventory, seek out these single source suppliers and begin your processes for sourcing additional supplier alternatives.

Get Out the Map

Earlier, we mentioned ensuring your vendor list includes location information. This isn’t just important for back-office functions like ordering and payments. These locations can help you map your critical suppliers to have a better understanding of where your supply chain originates and traverses to get to you.

Literally, take a look at a map and evaluate whether your supply source relies heavily on a specific country or region. If so, consider what would happen if there were a disruption there. What can you do to diversify your product sources so you can quickly readjust if an issue arises?

If you’re not already using an ERP solution to manage your supply chain, this is one place you can definitely reap the benefits. It’s certainly much easier to track and manage all of your suppliers in a single solution than spreadsheets or other manual methods.

Know Your Inventory

Now that you know all of your suppliers and what they contribute to your operational success, it’s also important to have a good picture of your inventory. Many businesses, even large ones, still rely on either spreadsheets or paper documents — or even worse, an employee’s memory — to manage inventory.

Did you know that almost half of all supply chain professionals still use excel spreadsheets?

Inventory insight is crucial not just to your overall success, but also to keeping your customers happy. If you don’t know how much inventory you have in stock — whether it’s a part to build your product or your products themselves — how do you know when you’re running low? Are you managing the ordering cycles to replenish? How are you aware of potential impacts of a supply chain disruption if you don’t know what you have in stock?

An ERP with inventory reorder management features can keep all of these details right at your fingertips, whether you have one location or many. And best yet, you can even set your ERP to automatically generate purchase orders for you so you’re never in danger of running out of in-demand products.

Know Your Costs

Because employees responsible for supply orders are often several steps removed from executive leadership, they may not be budget-focused when supplies run low. This can be especially complicated by existing business relationships where, for simplicity, supplies are repeatedly ordered from the same vendor whenever they run low or whenever your calendar reorder triggers.

The problem here is that you often lose sight of expenses. Incremental price increases over time can be missed and before you know it, you can spend thousands of dollars more on your products without realizing it.

An ERP with inventory management can help you stay within budget by tracking those cost changes over time. That way you always know what you’re spending and how it aligns with your budget. If you see costs increasing, you can get more out of your supply chain by considering other vendor options.

Improve Your Relationships

Having good relationships with your supply chain vendors is paramount to success. If you’ve ever missed a reorder or used more parts or products than anticipated, a good relationship with your vendor can be the yay or nay to getting a quick shipment to help you stay in stock.

One way to build this relationship is ensuring good communication, insight, billing, and payment practices. An ERP, especially one that intelligently automates reorders and facilitates payments for you, can help build these strong relationships. By increasing your reliability and feedback, should you bump into an obstacle down the road, your stage is set to make the most of that good relationship with your suppliers.

Happier Customers

What does supply chain optimization have to do with happy customers? It’s simple! By ensuring you always have the products and services in stock that your customers want — and by tracking your pricing models and even facilitating shipping and receiving with an ERP — you can maintain existing customer relationships and always be prepared to respond to requests from new ones. Better supply chain management in the end means happier customers, and that means you’re poised for success.

These are just a few of the ways supply chain management can help you be more successful. While it starts with insight, your supply chain optimization journey can be managed with efficiency and cost savings with an ERP. Need help choosing the right one for your organization? Reach out to an aACE advisor with questions or join us for a webinar to see how you can put aACE to work for you.

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