Supply Chain Optimization: 12 Best Practices
If you’re having recent supply chain optimization problems, don’t beat yourself up — or blame your staff. The pandemic has made it a challenging year for everyone, and it has definitely done a number on supply chains around the world. Of course, if you’ve had issues for a while now, even pre-COVID, it may be that your supply chain optimization blueprints should be dusted off and rethought. After all, the better your supply chain, the healthier your business.
So if you’re looking for ways to improve your distribution optimization or logistics optimization, we’d like to suggest these 12 best practices. At Nexterus, after all, supply chain optimization is what we do. From our corporate team to our franchise partners, we’re a supply chain management optimization company — we live and breathe this every day.
#1. Proper Forecasting
One of the best things your company can do to ensure peak supply chain optimization is to develop a method for accurately forecasting consumer demand.
If you over-forecast demand, you can wind up with millions of dollars of excess inventory, which can be devastating to a company if you can’t sell it. But if you under-forecast, you may have far more demand and not enough supply and lose millions in potential revenue.
Even if you rationalize that you’ll eventually catch up and earn that revenue, you may not. Your competition, after all, will do all it can to fill the demand.
#2. Improve Communication Skills Between Partners
Ideally, if you want to really achieve supply chain optimization nirvana, everyone in your supply chain should be able to communicate with each other and collaborate. Think of your supply chain as a soccer team. If you’re all working as a team to make a goal, that’s going to go a lot better than each player doing his or her own thing to score.
If you can develop a communication shorthand between factories, vendors, and suppliers, your company is going to find that it is far more efficient.
#3. Remember Your Relationships
This goes hand-in-hand with communication, but if you have suppliers, you may want to do more than communicate but occasionally ask for feedback on how things are going. If you can help your supplier when times are tough, they may remember you well if you ever need a favor. It’s easy to forget that a supply chain can be ruined by a link in the chain that isn’t performing well because of a deteriorating relationship.
#4. Use Centralized Management Software
Just as you want your partners in your supply chain to be able to communicate with each other, you’ll be able to communicate far better if your software allows all of your departments, from sales to inventory to finance systems to vendors and suppliers, to function as one team.
#5. Your Products Should Be of Superior Quality at Affordable Prices
That should be a given, but if your supply chain has a lot of moving parts, a business owner can be forgiven for thinking, “Well, what’s the harm in doing this small step on the cheap?” Maybe no harm, unless it becomes the weak link in the supply chain that brings everything to a halt.
#6. Keep Your Cash Flow Current
As we all know, running out of money — or even coming close — is a good way to slow down or stop your supply chain.
#7. Plan for Contingencies
The pandemic is a nice life-lesson for why it’s important to think about emergencies and how not planning for them can throw supply plan optimization off course. You could find yourself unprepared for emergencies if you aren’t occasionally looking at your weaknesses in your supply chain and asking questions, like, “What would happen if a hurricane took out this supplier?” (Or: “What would happen if a pandemic slowed my supply chain down?”)
#8. Continue Training Programs
Let’s say you’re the third or fourth-generation owner of a family business. The supply chain that you had in 1950 isn’t going to be the same supply chain in 2020. Processes evolve. People quit, are fired, or retire. New people come in. Of course, you’re going to train new employees, but the point is, nothing stays the same. Investing in continued education programs for the key personnel in your supply chain is never a bad idea.
#9. Invest in Your Infrastructure
As noted, what worked in 1950 isn’t likely going to work in 2020. Any time you can divert extra revenue to improving your infrastructure, you’re going to increase the odds that your supply chain is remaining modern and efficient.
#10. Look for Bottlenecks
What’s running really well, and what’s not? What’s your slowest point in the supply chain? Maybe there’s nothing to be done, but maybe you could be fixing that bottleneck by investing in your infrastructure or hiring additional people.
#11. Make Sure You Have the Right Staffing
There’s an old saying that supply chains are people. Actually, fine, it’s not an old saying, but it should be one. Even with automation and technology, the right and wrong people staffing a supply chain can make it a huge success — or not.
Exhausted by everything that a business needs to do to achieve superior supply chain optimization?
It’s no wonder. It’s a big job. Look, any supply chain can be weighed down when a business owner is trying to do everything themself. That’s why call centers were invented. That’s why trucking and shipping firms exist. A small business owner might use a payroll service, knowing he or she doesn’t have the time or money to hire somebody to do human resources. Outsourcing can free up a lot of tasks.
Distribution optimization and logistics optimization is a full-time job, and then some. Especially the bigger your company and the bigger your supply chain.
This last point — outsourcing — can solve all of the other issues we just mentioned, like improving communication and using centralized management software. If you’re a business that’s struggling with your supply chain, working with a company like Nexterus can solve your supply chain problems. We’ll worry about those 11 other things on the list, so you don’t have to.
But if you’re a supply chain consultant helping your own clients with their supply chains, or perhaps you’re a supply chain management executive looking for the opportunity to own your own business, you really should consider joining forces with Nexterus and running your own franchise territory.