Supply chain optimization is essential for many companies in many industries. It can help them achieve raw profitability and grow, as well as delight their customers with fast turnarounds. Whatever you manufacture or transport, These 15 optimization tips will help you reach the next level.
15 Ways to Optimize Your Supply Chain
1. Create a Plan and Measure Performance
Supply chains are essential to the survival of the global economy. Research consistently shows that around 79% of companies who invest in supply-chain improvement are successful and optimization significantly outperforms and out-earns competitors who do not use optimization.
Supply chain leadership is not something that just happens. The companies that can see the big picture, plan ahead and understand the metrics they need to measure their successes and failures are the ones that have the greatest success in logistics. These KPIs include:
- Fulfillment accuracy
- Customer order cycle time
- Cash-to-cash cycle time
- Inventory velocity and days of supply
- Per-unit freight cost
2. Outsource Where You Can
Maintaining a supply chain requires a lot of work, time, and labor, regardless of whether you are in eCommerce or manufacturing. It can be beneficial to outsource key components of your supply chain in order to streamline the process and allow you to focus on product innovation and other core competencies.
Companies can outsource customer service, returns, logistics, tracking, or the procurement process. These options have proven to be strong options that help them tighten their belts and restore their efficiency.
3. Offer Incentives to Eliminate a Time Crunch
According to surveys, modern consumers expect fast and free shipping when placing an order online. The good news is equally convincing evidence that shows how companies can simultaneously satisfy their end-users while reducing the time required to complete logistics and supply chain processes.
According to research, 83% of consumers would be willing to wait at least two more days for their order turnaround time if it means receiving free shipping. Businesses may also offer discounts and freebies Amazon Prime is an example of how to buy time and customer loyalty, just like Amazon.
4. Adopt New Order Picking Technology
Order picking is one of the most stubborn bottlenecks in a supply chain. There are many things that could go wrong and cause customer disappointment, including mids-stowed goods, employee errors, and goods that sustain damage in racking locations. Technology can help to fill in the gaps.
Pick-to-light systems can be easily installed and integrated with existing ERP or WMS systems. These systems are used by many companies to improve pick productivity by up to 50% and increase picking accuracy by more than 99%.
5. Evaluate Warehouse Locations
As the U.S. economy and global economies change, warehouse locations are being scrutinized more closely than ever. Many companies are now taking an urgent look at their warehouse locations. Tariffs, taxes, offshoring, reshoring manufacturing, and, of course, the “Amazon Effect”. Customers have higher expectations about shipping costs and delivery times. All of these factors play a part in the decision to redraw and reconsider distribution networks.
6. Reduce Waste with More Effective Routing
Companies should also take into account transportation and delivery routes when reassessing warehouse locations and other factors. These pathways can have a major impact on profitability, efficiency, waste reduction, and profitability.
Poor route optimization can have hidden costs.
- Costs of fuel and labor are higher
- A greater environmental impact
- Customers dissatisfied and delayed
Routing optimization techniques include avoiding distribution centers whenever possible, consolidating freight to maximize vehicle capacities, and using carriers who are familiar with the particular region.
7. Use Predictive analytics and Big Data
Many of the world’s largest companies use predictive analytics and big data systems to anticipate consumer demand and optimize supply levels. Manufacturers can lose as much as 10% of their retail sales if they run out of allergy medication during peak demand. These and other smaller businesses can benefit from big data. Predictive analytics has become an integral part of enterprise resource planning systems (ERP).
Intelligent, predictive analysis allows you to understand customer buying habits, seasonal market changes, competitor actions, geopolitical disruptions, and business partner interactions. This will help you determine how much product is required, where it should be, and when it should arrive.
8. Hold Partners Accountable for Performance
From your customer’s perspective, There is no difference in the performance of your company and that of your suppliers, distributors, and delivery companies. This is why companies need to hold their partners responsible for providing exceptional service.
These KPIs are comparable to the KPIs that we have discussed in-house, such as order accuracy or fulfillment time. It is impossible to divorce your company. However, you can and should reconsider the person you are in business with if your partner can no longer meet the performance metrics set out in your service contract.
9. Rethink the Returns Process
Online orders have a 30% return rate, which is more than three times that of brick-and-mortar. 72% of online shoppers want free shipping. 92% will make additional purchases if the return process makes them feel comfortable.
There are many things you can do to optimize your returns process for your employees and customers.
- It should be easy and quick for customers to make a return online.
- Create a strategy to manage returns across all sales channels.
- Use no-hassle packaging, which is easy to seal and reuse in the case of a return.
- Data gathered from customer returns can be used to inform product design, merchandising, and inventory strategies.
10. Stay Organized and Accurate
If your house is not in order, you can’t get your goods to their destination. Many supply chain companies rely on Six Sigma and other organizational principles in order to keep their operations organized, efficient, and accurate.
Six Sigma is a process improvement methodology that focuses on eliminating waste in the supply chain. This includes fulfillment defects, excess processing and rework as well as product damage and overproduction. This philosophy can be applied to your supply chain operations by doubling down on FIFO (first in, first out), adding detailed training for employees, and structuring process improvements.
11. Reevaluate Pallet Choices and Other Products
No one needs to remind you how crucial pallets and product skips are if you have been in the supply chain for some time. There’s a possibility that your pallet selection and shipping cartons could be limiting your optimization efforts.
One example is the conversion from wooden pallets to plastic. Plastic is more efficient than wood in shipping, racking, and handling, which helps to keep costs down and reduce waste. Plastic pallets are far less likely than wood to break or splinter your material handling equipment.
Another factor to consider is the shape of your shipping cartons or case packs. A more sensibly sized or shaped box can help you maximize the freight you can move with a single truckload.
12. Create and implement a Cycle Count program
100% inventory accuracy is essential for optimizing supply chains and meeting customer expectations. This accuracy can only be achieved by a systematic and ongoing cycle count program.
Customers are more frustrated than being told that the product they ordered is not available. This is not good for customer relations or efficiency. There are many benefits to ongoing cycle counts. One of these is that doesn’t need to be shut down in order to take a complete inventory.
You don’t need to know where to begin, just look at the most important and fastest-moving products you have and build your cycle count system around them.
13. Have a look at your Supply Chain Leadership Structure
Who is in charge? Your company may be like many others. Executives might lack the expertise or interest to manage your supply chain effectively, and make timely and realistic decisions. Many organizations have a central model for their supply chains that includes thought leaders and decision-makers from each business unit.
Because business is complex, it’s important to have passionate, knowledgeable, and dedicated leaders in all aspects of supply chain activities. This helps prevent procurement and fulfillment from being a competing priority for executive attention.
14. Utilize a Transportation Management System
Transportation management systems (TMS), a suite of logistics software, are designed to improve the flow of goods and materials into and out of a company. TMSs can reduce uncertainty and delay in many supply chain activities including, but not limited to:
- Documentation and compliance
- Planning and optimization of routes
- Tracking vehicle and order
TMS products can even use machine learning to optimize supply chains. A TMS might provide analytics to identify which carriers are frequently late and which shipping routes are not optimal. This will allow the TMS to determine when invoices should be delivered to avoid late payments.
15. Double Down on Improving Communication
High-quality communication channels and skills are key factors in enabling companies to be more competitive than their competitors. Order fulfillment and material procurement must be done quickly and without errors. This requires transparency from suppliers, manufacturers, freight companies, and retailers. Particularly important when multiple suppliers are involved, is excellent communication.
Honesty and transparency in communication reduce redundancy and surprises. Emerging problems are nipped in their tracks before they become serious headaches.