What does it take to improve supply chain efficiency? All you really need is access to the right technology and skill sets. How important is it to be fully equipped? The state of the global supply chain answers that question perfectly.
Current Supply Chain Struggles
The last couple of years have seen stumbling block after stumbling block in the supply chain. With catastrophic disasters like the Ever Given accidentally blocking the Suez Canal in 2021 to COVID-19 disrupting the workforce of many supply chain-dependent industries, the supply chain has been through the wringer.
Looking forward, here are some issues the supply chain will have to worry about:
- Global inflation: As global inflation is projected to reach upwards of 7.4% in 2022 when compared to 2021, many consumers are cutting back on what they consider to be necessary purchases. This can make it difficult for supply chain managers to predict demand accurately. Inflation may also cause production costs of certain products to rise, limiting how much certain manufacturers can purchase at a given time.
- Energy shortages: The ongoing war between Russia and Ukraine has led to a bottleneck in the flow of natural gas, leading much of Europe into an energy crisis. This largely affects the metal and agricultural sectors but may have a lasting impact on other supply chains.
- Material scarcity: From medical gear to foam mats, significant material scarcity plagues many supply chains. This is primarily due to spikes in demand for certain industries. Such was the case for medical equipment at the peak of the COVID-19 pandemic and is currently the case for construction materials because of the increased demand for new homes.
What Is Supply Chain Efficiency?
Supply chain efficiency is the optimal use of your resources within supply chain management. This ensures no time or resources are wasted within any supply chain step. It also helps businesses ensure orders are fulfilled on time, which benefits you and your customers.
How Do You Measure Supply Chain Efficiency?
There are several metrics you can use to gauge your supply chain’s efficiency:
- Cash conversion cycle: How long it takes to convert cash into inventory and then into sales.
- Customer order cycle time: How long it takes to complete delivery after an order has been placed.
- Days inventory outstanding (DIO): The average time you hold your stock before turning it into sales.
- Days sales outstanding (DSO): How long it takes to collect payment from customers after a sale goes through.
- Fill rate: The percentage of orders that can be fulfilled with readily available stock.
- Inventory turnover: The number of times your inventory cycles annually.
How to Improve Supply Chain Efficiency
You’re probably well aware of your supply chain needs, but how do you improve supply chain efficiency? Simply focusing on the above metrics tracks where you’re at but may not give you a clear path to improvement. You need to employ proven strategies. Here are six ideas to get you started on your efficiency improvement journey.
1. Evaluate Relationships with Suppliers
Every supply chain begins with suppliers, so it’s a logical place to improve efficiency. Consider how well you communicate with your suppliers. Are they responsive? Or do you waste time trying to communicate?
Are your suppliers reliable, meaning do they deliver you products when you need them? It may be worth switching suppliers if they frequently fail to follow up on their promises.
But don’t go burning bridges quite yet. If you think there’s a communication problem, ensure it’s not breaking down on your end. If you’re the one who is difficult to reach, work to remove those communication barriers.
2. Improve Supply Chain Visibility
Supply chain visibility is tracking every component of your product as it moves from the supplier to your warehouse. A simple way to improve visibility is to give you and your suppliers the ability to check your inventory in real time with an inventory management system.
When suppliers know what you have in stock, they can preemptively send orders to ensure you reach future demand. Meanwhile, giving yourself visibility can help you stay on top of your essential supply needs.
Freight management solutions can help improve visibility, giving you clear insights into shipping status to ensure your orders arrive on time.
3. Automate Wherever Possible
Automation is always your friend in a supply chain. It’s best applied to time-consuming tasks, like order processing and shipping preparation. Smart contracts are a great example of seamless automation—a function that can improve efficiency with order and payment processing with simple “if/then” command statements.
4. Utilize Demand Planning
Demand planning is a simple process of using historical trends to plan your inventory needs. For example, if you’re a clothing vendor, you may notice your long sleeve shirts sell better between September and November. Rather than waiting for your inventory to be exhausted, you can plan ahead and order more long sleeve shirts to pad your stock ahead of the demand.
5. Eliminate Data Silos
Data silos are inherently inefficient in a supply chain. Every touch point, from demand planners to inventory managers, can benefit from having as much information about the supply chain as possible.
6. Train Employees
Finally, once you’ve implemented these strategies, it’s time to train employees to run your new and improved supply chain. If you have any long-time employees, ask them for their feedback on your changes. Have they made things more efficient? Is there a significant learning curve? Take their feedback and revise your strategy if necessary.
Get Your FF&E Efficiency in Line
If you’re looking for a better solution to your FF&E supply chain, Mesa Logistics Group can help. Our future-forward tracking and data collection processes can provide you with everything you need, from inventory management to customer installation. Contact us today to learn more.