Operating a business successfully in today’s complicated and fast-paced supply chain ecosystem requires methodological, effective management. A well-designed supply chain management process is both a logistical necessity and a strategic one. First, as companies navigate the complexities of global markets, changing consumer demands, and technological advancements, the role of supply chain management has evolved into a critical driver for operational excellence. Second, a well-designed supply chain management process can heavily influence the overall performance of a business and give it a competitive edge.
By thoughtfully designing the supply chain management process governing how an organization functions, businesses in the supply chain can enhance their operational abilities, reduce expenses, encourage sustainability, and best meet customer demands.
Here’s everything you need to know about designing the supply chain management process in your own business, including key elements and best practices for implementation.
Businesses in the supply chain are not like any other businesses. These organizations need to manage a wide array of logistics, such as the delivery and shipping of inventory, navigating vendor relations, planning for future scenarios, and aligning operations to business goals. Because of this, they rely on a combination of strategic logistical protocols, data, and insights to properly function, and to remain both profitable and sustainable.
The answer to all these needs is to design a comprehensive supply chain management process. This is a robust umbrella process, which dictates how an inventory-based organization in the supply chain functions. When this process is effective, it can tip the scales in an organization: research shows that 81% of companies with high-performing supply chains have greater revenue growth than their competitors and that businesses with optimal supply chains can lower associated costs by 15%.
Supply chain management processes don’t just benefit the business: they play an integral role in the customer experience. In general, one study found that more than half of customers have higher expectations for customer service than they did in the previous year and that companies that prioritize the customer experience can be 60% more profitable than ones that don’t. When operations are governed by a well-designed supply chain management process, the customer experience can be consistently optimal.
While a supply chain management process might look different from organization to organization, it typically has a few key components.
These can include:
Strategic sourcing involves identifying, evaluating, and selecting reliable, cost-effective suppliers, to ensure the procurement of goods. Businesses might look to build strong supplier relationships and negotiate favorable terms.
Inventory management is multifaceted, and can include things such as balancing inventory levels, implementing advanced inventory tracking technologies, and integrating inventory with inventory management software. Businesses might look to deploy inventory technologies that help with accurate tracking, order optimization, and error reduction.
Logistics and distribution can involve anything from optimizing transportation routes to the warehouse management system that’s being used.
Inventory-based businesses rely on demand planning to anticipate future needs. It relies on historical data, market trends, and collaboration with internal stakeholders, along with statistical models and technology that can support demand forecasting.
Designing an effective supply chain management process requires several steps.
To design a new process, it’s first important to understand the state of your current processes. Begin the design process by conducting a comprehensive audit of existing supply chain processes. Evaluate the efficiency of each component, from sourcing to distribution, and identify areas of improvement.
Specifically, use KPIs to assess the effectiveness of current operations. Metrics such as lead times, inventory turnover, and order fulfillment rate might be useful. Also, pinpoint bottlenecks and inefficiencies, to see where there is room for improvement. These might include delays in procurement, excess inventory at certain stages, or issues in transportation and distribution.
Supply chain management processes need to align with broader business goals, for them to help an organization accomplish those goals. Whether the focus is cost reduction, market expansion, sustainability, customer satisfaction, or something else, these goals need to be clarified.
Then, the supply chain processes need to be tailored to meet the needs of the business. This might mean that considerations need to be taken when it comes to sourcing, production, and/or distribution. Tip: consider the company’s value proposition, and how your supply chain management processes can contribute to your competitive advantage (such as speedy delivery times).
There are many advanced digital tools and systems available that can help support the work of businesses in the supply chain. Embrace technology as an enabler of supply chain efficiency, and learn how tools such as artificial intelligence, advanced forecasting, and supply chain planning suites can enhance visibility, automation, and decision-making. Invest in scalable technology solutions that have the power to evolve over time with your business.
What are some of the best tools you can use? There are many available which can support the supply chain management process, by helping with things such as real-time tracking, in-depth monitoring, and advanced analysis. This might look like AI-driven demand forecasting, analytical dashboards, and tools that help with supplier tracking.
Fostering collaboration and communication can be crucial for breaking down information silos and ensuring a team performs at its peak, which is integral to an effective supply chain management process. Cross-functional collaboration ensures that each team understands its role and contributes to the overall success of the supply chain. To maximize collaboration and communication, establish communication protocols and expectations that encourage information sharing and collaboration. Also, consider using technological solutions that democratize your data and make it readily available to all stakeholders.
Additionally, assess how you’re addressing communication between supply chain partners. Take steps to strengthen communication with external partners, including suppliers, manufacturers, distributors, and logistics providers. Clear communication and information sharing enhance coordination and responsiveness across the entire supply chain.
To design a supply chain management practice that meets the goals of your organization and helps optimize and improve workflows, here are some best practices to keep in mind.
Supply chain management processes require constant monitoring and upgrading because even something that works well today can quickly become obsolete. To best be prepared to pivot and change processes, supply chain organizations can establish a culture of continuous improvement. This mindset encourages innovation, learning, and adaptation.
Leaders can take a top-down approach to fostering this culture and can demonstrate the value of improvement initiatives through visible support and participation. It’s also important to engage employees during the improvement process and to provide ongoing training and development opportunities for employees to stay updated on industry best practices, emerging technologies, and evolving market trends.
Identify and monitor metrics and data that align with the specific goals of your supply chain business, to determine how your processes are performing. For example, you can monitor metrics such as on-time delivery rates, inventory turnover, lead times, customer satisfaction scores, and cost-effectiveness metrics.
Also, benchmark performance for your organization, employees, and vendors, and monitor it against industry standards and other top-performing organizations. You can use these insights to determine where you can improve, and where you can fill gaps that your competitors are missing.
Establish a routine for the continuous evaluation of the supply chain management process to ensure it stays up-to-date and delivers desired results. Regularly assess the effectiveness of each component, considering changes in market conditions, technology, and customer preferences. Use data, inventory analytics, employee feedback, and other insights to see where the processes strengths and weaknesses are. Consider ways to use modern technology to enhance your processes and look for upgrades that can give you essential features and functionalities.
A robust supply chain management process requires the support of technological infrastructure. StockIQ is a supply chain planning suite that improves visibility and provides you with real-time insights into your operations. With StockIQ data and insights, leaders can design a high-performing supply chain management process, monitor progress and outcomes, and make strategic decisions that improve performance.
Find out how StockIQ can support your supply chain management process by contacting us today.