An efficient supply chain can lower customer churn. It’s essential that customers receive the products they order in a timely manner. Further, your company must deliver products efficiently to keep your costs low. In essence, you’ll be applying supply chain optimization. This post will help you understand what a supply chain is and how you can use it to earn loyal customers.
What is Supply Chain Optimization?Supply chain optimization is the process of analyzing product pipeline infrastructures to make them more efficient at the lowest cost possible. This process is often ongoing and can include running supply chain network optimization scenarios to learn about and improve the processes. A supply chain is the ecosystem of your business. However, many of the components of your supply chain are beyond your control. The processes of your suppliers (and their suppliers) are black boxes for most business owners. It’s difficult to optimize any process when you don’t know how they work. You're the customer of your supplier, which means you have a voice. You can proactively seek information about their processes to learn more about how to help them improve. Also, you can have them competitively bid to gain insight about their responses and procedures. This information will shed some light on those black boxes.
4 Tips to Optimize Your Small Business Supply ChainWhen your business is ready to optimize your supply chain, you may learn about third-party logistics (3PL) providers who offer to help. These 3PL companies often have formal approaches, such as supply chain optimization modeling. While this can help find the strengths and weaknesses of your business strategy and supply chain processes, it may be overkill for the small business owner. This post concentrates on using four tips that have been effective in optimizing supply chains. It's divided into two sections: internal and external processes. The internal processes include inventory control, analyzing current logistical procedures, and handling requests properly. This is a good place for most business owners to start when optimizing any part of their supply chain. The external processes require contacting supply chain managers and their suppliers (Tier 2) and seeing what optimizations can be made via agreements.
Exercise Inventory ControlThere's no easy answer to the inventory level control problem. While you never want to run out of products to sell to customers, you don’t want to produce in excess of demand. With technology, more companies are turning to Just-In-Time (JIT) inventory procedures. Current technologies are more efficient to help determine demand. The forecasts produced by artificial intelligence (AI) algorithms are more accurate today, due to big data and better processing power. This development can help companies forecast their production cycles more accurately. If you think these AI algorithms are out of reach to small business owners, know that there are cloud solutions available from Microsoft, Amazon, and IBM that are affordable and often paid for on an as-needed basis.
Step Back And Inspect Your Logistics ProcessesInspecting your logistics processes will help you gain the insight you need to determine changes to make. Technology will play an ever-increasing role in learning about the interconnected pieces that make up a supply chain. It’s difficult to track these complex networks manually. Companies are implementing machine learning algorithms to handle the job of optimizing logistics processes, and by extension, the supply chain. As machine learning excels at error reduction, it’s the perfect technology to analyze all the interconnected nodes and layers that make up the supply chain. Traditional methods of analyzing logistics processes often treated each component in isolation, making it difficult to know how the parts reacted to one another. Machine learning removes that constraint. Of course, this requires staff that's knowledgeable in working with machine learning algorithms.
Handle Requests Appropriately (RFQ, RFP, RFI)Information is your best ally when optimizing your supply chain. When looking for new suppliers or trying to negotiate with current ones, have them go through the request process. There are a few types of requests that you can use:
- Request for Quotes (RFQ) - When you're ready to contract with suppliers, you can submit an RFQ. This often occurs after you've gathered information and asked for proposals (RFI and RFP).
- Request for Proposals (RFP) - This document is more detailed and helps vendors understand what types of problems you’re looking to solve in your production process or for customers.
- Request for Information (RFI) - When you ask for an RFI, it's usually for suppliers that exist in your supply chain. This document allows you to learn more about their processes and position within the network.