If there’s an industry-specific term that’s graced more conversations than ever since 2020, it’s “supply chain.” The logistics upheaval triggered by the COVID-19 pandemic uncovered systemic issues in business management that can’t be undone. Practices that once worked for businesses across the globe now seem outmoded and risky, sparking headaches everywhere.
But how do business leaders learn new tricks for today’s reality? And how can supply chain improvements lead to better results for your bottom line and customer satisfaction? At its core, healthy supply chain management helps your business deliver on its promises. Consider these three ways to improve your organization’s supply chain, improve workflows, and enhance your customer and employee experience.
1. Diversify Your Supplier Base
If you’ve ever uttered the sentence “We’ve always done it that way,” it’s likely that your supplier base could use a shake-up. Loyalty is great, but relying on a single or short list of suppliers for your operations is a risky move. When one cog slips, your entire process feels the pain.
Review your current supplier list and consider how you can create backups for your core component needs. Identify competitive suppliers of essential inputs, then begin negotiations. Like you, suppliers know that acquiring new customers is costlier than retaining existing ones, so they seek reliable partners. If you can commit to a long-term contract, you’re more likely to negotiate lower per-unit costs. And that will be a boon to your profit margins.
If you sell products online, take things a step further and review potential third-party logistics providers to lessen your burden even more. Outsourcing your entire fulfillment process to a 3PL provider can give you a major advantage. Many 3PL vendors offer warehousing and fulfillment in addition to inventory management. This option can be especially helpful for smaller e-commerce companies in both streamlining fulfillment and enhancing expansion efforts.
2. Establish Credit Lines With Key Suppliers
If cash flow is king, then your credit line is the emperor. A business’s credit line opens up the opportunity to execute inventory orders strategically. Instead of relying on purchase orders or check approvals, procurement using an existing credit line reduces costly steps.
For example, say your manufacturing company needs to purchase metal sheeting, whose price adjusts with the market. Today, prices are down, and you have customer orders set to begin production in the next few months. If you make a bulk order now, you can take advantage of lower prices thanks to market supply and demand. The only problem is, your company takes a minimum of three days to get a purchase order through its workflow.
Bottlenecks like this are all too common, making process and timing enhancements within your procurement process essential. With a credit line, you can complete your bulk order and avoid the impending demise of your profit margins. Furthermore, every opportunity to use your credit line needn’t be driven by a crisis. You can use your credit line to flatten cash flow, build relationships with new suppliers, and reduce the price you pay per unit.
3. Use Data From a Variety of Sources to Drive On-Point Ordering
Data is the darling of today’s boardroom discussions. More than numbers and lines sprinkled across a PowerPoint deck, data tells a story. As the world is becoming increasingly digital, the numerical representation of processes and sales conversions is becoming more accessible than ever. Data visualization tools like Tableau and Microsoft Power BI can paint pictures that enable better decision-making. Great inventory managers know how to use them to forecast needs, anticipate issues, and monitor the ever-changing environment of their industry.
While some industries have higher tolerance for delays, others require immediate delivery of goods to customers. For example, boutique fashion shops often operate on weekly shipments and releases that keep customers engaged. The anticipation of a new shipment drop nudged along by social media pages holds loyalists’ interest. Business owners can monitor social media engagement and clicks to see what’s trending. Social data can provide insight into what customers want more or less of, and buyers can order accordingly.
If a boutique owner isn’t sure about a new product line or trend, they can offer items for pre-order. This reduces their risk, as they’re less likely to buy inventory that won’t sell. Once the pre-order window is closed, they can place a bulk order to the supplier. Customers who missed the initial offer can place a backorder. While often considered a negative in customer service circles, backorders can pique consumer interest while reducing retailers’ inventory risk.
Building a Resilient Supply Chain
Creating a business is an accomplishment in and of itself. But refining and improving it are just as essential in the volatile business environment that has followed in COVID’s wake. Fortunately, there are ways to build a resilient supply chain that flexes to today’s needs and offers insights into what’s ahead.
Model existing scenarios, test them with your logistics partners, and track performance regularly. Be open to new sources of data outside of the datasets you own. As business leaders learned in 2020, the supply chain is complex, so monitoring news outlets alongside industry sources is imperative. When you monitor, analyze, and adjust your supply chain, you can anticipate changes instead of reacting to them.