Supply chains are the lifeline for every eCommerce business. Whether you’re a manufacturer producing and assembling items, a distributor, or a wholesale or retail seller, you’re a part of a supply chain. And, no matter your position in the supply chain, optimizing it is vital to ensuring a successful business.
That’s why companies are constantly looking for ways to improve their supply chain management. Research has shown that 79% of companies that implement supply chain optimization techniques improve their revenue significantly more than those that don’t.
Optimizing your supply chain can improve efficiency and productivity, leading to better revenue for your business. In fact, 57% of companies believe that supply chain optimization has given them a better margin of development and growth over their competitors. Similarly, 70% of industry professionals have predicted that supply chain network optimization will result in better customer service and business growth by the end of 2020.
With all this in mind, the question you should be asking yourself is, does your supply chain need optimization? To answer this, you need to consider whether your customers are happy with the shopping and post-purchase experiences you offer. Do they get what they want, at the time they want it, and at the lowest possible cost? If you can’t answer these questions with a resounding yes, then your supply chain needs to be optimized.
What is Supply Chain Optimization?
If you’re asking, “What is supply chain optimization?” then you’re already well on your way to growing a successful business. In a nutshell, this is a technique that allows you to maximize your sales and revenue by selling or making the right things at the right time for the right target audience. Technically, it’s putting the appropriate tools and processes in place to make sure your manufacturing and distribution operations are the best they can be.
Managing the whole supply chain process gives you the ability to save time and cost. Translation: you’ll be able to minimize operating expenses and maximize your profit margins. However, all of this is easier said than done. To create an optimal supply chain, you need to identify your problem areas, think of good solutions, and implement them. As the supply chain brings together the production, sales, and financial sides of your business, creating a results-orientated, efficient supply chain can be tricky. But, it’s totally doable.
What’s the Goal of Supply Chain Optimization?
Optimization shouldn’t be just a buzzword for your business. Optimizing supply chain processes should be a practical experiencewith tangible goals and steps. Of course, this requires you to make some effort. You need to take the time to identify your business’ problem areas and find appropriate solutions. But, there’s plenty of good to reap if you play your cards right. The benefits of optimizing the supply chain process are:
- Better inventory control.
- Faster shipping and order fulfillment.
- Efficient planning.
- Improved customer service.
- Better decision-making.
- Revenue and profit growth.
- Reduced costs.
- Better supplier performance.
- Enhanced quality.
10 Tips for Optimizing Your Supply Chain Process
If you've decided to take the plunge and look at how to better manage your supply chain, there are a few steps you can take. Here are a few top tipcs for optimizing your supply chain network:
1. Outsource Business Activities
If you want to streamline your business, then you may need to consider outsourcing certain aspects of it. Often, businesses shoot themselves in the foot by trying to do everything in-house. Outsourcing things like procurement, logistics, or even customer service can benefit your business and put it on an optimal path for success.
2. Establish Communication Between Suppliers and Retailers
This is perhaps the most important aspect of optimizing the supply chain. It’s crucial that there is good, transparent communication between the retailer and supplier or manufacturer. This ensures timely fulfillment of demand and avoids any confusion. If you’re using more than one supplier, then this is even more important as you’ll need to build good communication with each one.
3. Use Mobile and Internet Technology
For retailers, mobile technology can be very helpful for marketing, direct sales, and information. The internet is also very important because it allows retailers to communicate by email. Further, social media allows retailers and customers to judge trends and be proactive. Similarly, retailers can leverage these technologies to offer things like location-based discounts and services to increase sales.
4. Use Centralized Management Software
Optimizing the supply chain process requires all the facets of a business to work cohesively as a single unit. There are many management softwares available that integrate a business’ different departments so they work effectively with each other. For example, the right software can help your sales, inventory, and finance systems work together. These softwares can make the relevant data available in a centralized database which all the different systems have access to, allowing all business processes to be streamlined.
5. Use a Multichannel Approach for Demand and Supply
Use a multichannel approach to build a responsive supply chain. Inventory management is very important for an efficient eCommerce business, and demands must be communicated to suppliers quickly and effectively. Plus, a multichannel approach will help you plan ahead for your business and assist with forecasting trends.
6. Ensure High-Quality Products
Optimizing your supply chain also means getting superior quality products at affordable rates. For that, you need to understand your manufacturer or supplier very well. You need to know where their strengths are, and what their limitations are. Shop around until you find one that suits your business’ needs. Create a proposal and request quotes and information from a few prospective suppliers or manufacturers until you find the right one.
7. Plan Ahead
Planning is crucial for timely order fulfillment - it will help you avoid all manner issues with your logistics chain. Urgent order fulfillment doesn’t mean you have to pay more for shipping or air deliveries. However, if you fail to plan, you will rack up significant costs very quickly. Think ahead to ensure appropriate inventory management and order fulfillment.
8. Align with Your Customers’ Demands
Knowing what your customers want (and when they want it) allows you to judge future trends and keep your stock at appropriate levels. Analyze your sales data to determine future demands and trends and communicate these to your supplier(s). This will help you with your inventory management.
9. Use analytics tools
There are many tools available to help you analyze whatever data you have so that you can better understand your market and customers. It’s very important to know things like what your customers want, how they shop, and what seasons are good for your sales. Make sure you’re analyzing your data properly before you make pivotal business decisions.
10. Negotiate and Renegotiate
It’s very important to negotiate with your suppliers to get the best rates possible. But don’t forget that you can go back to renegotiate whenever appropriate. Cost-cutting is the ultimate goal of the optimization process, so you should take every opportunity to do this. Remember: if you can reduce the cost of your inventory, you’ll be able to improve your profit margins.
Models of Supply Chain Management
To optimize your supplier completely, you need to remember that your manufacturer also has their own suppliers. They get the parts of raw materials from their suppliers and then manufacturers the products which you buy. This means that there is a two-tier system in place, and you need to negotiate at both levels. That’s because any costs your suppliers save in getting raw materials will ultimately be passed on to you.
Management of Supplier inventory
This is a supply chain network optimization model which balances your demand with your supplier’s inventory. If your supplier has too many of your products, then either he or you will need to store it. But, if he doesn’t have enough inventory of your products, then you can lose sales and revenue and your orders may be delayed. So, you need to maintain a careful balance of inventory that must be managed through proper communication.
Ultimately, the cost of production is a huge factor in your revenue. The lower your production costs, the higher your revenues. That’s why it’s important to negotiate - and renegotiate - with your suppliers to find a balance between good quality and affordable rates. Some regions - like Asia - offer the best value for money proposition because cheap labour means your costs will be lower.
Careful logistics management can help you get reduced shipping costs so you can get your orders to your customers at the best rates. You may want to use third-party logistics and warehousing to optimize your shipping and delivery, especially for international sales. Easyship can help with this, so make sure you check our shipping rates calculator to find a courier solution that works for you!
To optimize your supply chain, you first need to ensure you’re managing your in-house resources appropriately. You need to check that the staff you have, the systems you use, and the technologies you’ve invested in are all pulling their weight to grow you business. If your technology is outdated or your staff is untrained, you will lose customers and orders, no matter how well you manage your inventory and fulfillment.
Optimize Your Supply Chain To Grow Your Business
If someone tells you that properly managing your supply chain is the key to performance and revenue growth, you’d do well to listen. If you want to ensure that your business has the best chance for success, then you need to find the flaws in your business processes and remove them.
Once you’ve streamlined your systems, you’ll have achieved what we call supply chain network optimization. Your customers will be happy with their experiences with you, while you’ll benefit from increased sales and revenue. And, now that you’ve ready this question, you know exactly what is supply chain optimization and how to implement it.
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