10 Steps to Supply Chain Efficiency

Updated on August 09, 2021 by Yulia Miashkova

Supply chain efficiency should be a top priority for your organization. Your supply chain is at the core of various business processes and departments. These include delivery, manufacturing, and even customer service or customer relationship management.

This interconnected nature of the supply chain means that any changes or issues in one part of the chain have a direct impact on your operations. Any improvements in your supply chain can have positive effects on your overall operations.

This article will discuss what supply chain efficiency is and the benefits of improving it. We will also list ten ways in which you can improve your supply chain for better, optimized operations.

What is supply chain efficiency?

Supply chain efficiency refers to an organization’s internal benchmark of performance. It is an evaluation of how an organization manages its processes to optimize resources. You can also take it as a measurement of the proportion of work completed against the resources directed towards that process or task.

To achieve supply chain efficiency, your organization must function in a way that gets the best out of its financial, technological, human, and other resources. Achieving this requires a focus on sustainability, reduced waste, and optimized processes in supply chain management.

Supply chain efficiency vs effectiveness

Although they sound similar and people often use them interchangeably, supply chain efficiency and effectiveness do not mean the same thing. Yes, they relate to one another but they are still very different.

As explained above, efficiency focuses on getting the degree to which your business’ processes utilize resources to run operations efficiently and smoothly. Effective supply systems are those with good output or outcomes.

Unlike efficiency, effectiveness is more about external factors and how your organization deals with outside influences.

Thus, operational effectiveness is better evaluated by looking at your company’s responsiveness and flexibility to external actors. It is an external benchmark of your organization’s responsiveness and management of non-company actors like clients, suppliers, third-party vendors, collaborators, etc.

10 ways to improve supply chain efficiency

Attaining supply chain efficiency is no easy feat but there are practical and simple steps you can take to improve it. Here are nine steps to assist you in improving your supply chain efficiency.

1.Enhance supply chain visibility

Supply chain visibility is the ability to monitor your operations at various levels. It includes tracking raw materials or supplies, different components, and final products at different stages of your supply chain.

To do this, you need to have clear visibility of your logistics processes and operations. This includes improving inventory and warehouse management, as well as optimizing your transportation and movement of items, i.e. the entire order fulfillment process.

2. Improve your inventory and warehouse management

As mentioned above, inventory and warehouse management play a vital role in the proper functioning of your logistics and supply chain. You need to create management strategies for both operational areas.

For your inventory, you need an inventory management system to help you track inventory in real-time and monitor your inventory levels. This supports your supply chain efficiency by helping you avoid bottlenecks or issues arising from a shortage of inventory or too much inventory.

Data and analytics features that come with most modern inventory systems will also give you more insight into your inventory processes. Inventory forecasting and other data features also help you with informed decision-making.

The benefits of your enhancing inventory management extend to warehousing. Having visibility over inventory and inventory movement helps you to better organize your warehouse logistics. You can also use a warehouse management tool to assist with daily warehouse operations.

3. Create a returns strategy

When customers return products, it affects different aspects of your supply chain like your inventory, warehouse and storage, and fleet management. Establish a returns strategy to help you deal with damaged or unwanted items from customers.

A reverse logistics strategy will give you control over your inventory. You can better track damaged inventory that you must return to the supplier. You can also account for the repackaging of undamaged products for resale.

Keeping over this information helps you identify the reasons for returns so you can address issues. For example, you can switch suppliers if you notice a pattern of poor-quality goods. It can also guide you on customer expectations, showing if you need to improve product descriptions or quality.

4. Nurture your business connections

Your business is not an island! For successful operations, you need to have suppliers, distributors, and other partners that support your operations.

Your supplier, for example, impacts your inventory levels and your ability to fulfill orders. A reliable supplier, that communicates when there are issues, enables you to plan well for inventory shortages, product delays, and more. Conversely, if your supplier is not dependable and doesn’t provide quality goods, this can affect your delivery success, inventory levels, and customer satisfaction.

It is important to select the right suppliers and other partners for your business. And once you’ve found partners you’re satisfied with, it’s important to sustain good relations with them. Communicate with them consistently and remain open and honest about your expectations and concerns. If you find that you’re unhappy with their service, don’t be afraid to find a better option.

5. Use relevant software solutions

Supply chain efficiency is all about improving processes and expanding operational capacity. Modern software solutions now play a central role in doing both for logistics and other supply chain organizations. We’ve already discussed the benefits of inventory and warehouse management solutions, but other kinds of software can help your efficiency. These include the following.

• Supplier management software.

• Collaboration tools.

• Order management platforms.

• Payment portals or systems.

• Demand forecasting solutions.

• Security and data protection tools.

• Transport management systems (TMS).

• Route planning and route optimization software.

Use software solutions that help you streamline, control, and speed up your processes. And of course make sure these solutions are focused on the needs of your business and the industry niche it occupies. For example, using brewery efficiency software if you run a budding brewing brand is better for supply chain optimization than picking an alternative software platform which is nowhere near as specialized,

6. Invest in automation

Automation has completely transformed how logistics companies manage their supply chain activities. You can automate repetitive and time-consuming tasks across your supply chain. This reduces strain on your workforce and allows you to direct their energy into more important tasks. Automation also assures that supply chain processes become more efficient and accurate as it reduces human error.

With less time and reduced error, you can cut costs by automating your processes. You would, however, need to spend money on automation systems. This can be costly; however, there are ways to get around it. For example, you can use transportation management software that comes with automation capabilities. That way you don’t have to pay for separate solutions.

7. Introduce advanced technology systems

Besides automation and software, there are other kinds of technology that your business should consider.

Artificial Intelligence (AI) and Machine Learning(ML) can help you improve inventory and warehouse management, reduce costs, and increase worker safety. They can also increase your supply chain visibility, optimize your operations, and ensure on-time delivery.

Another technology that benefits supply chain management is the Internet of Things (IoT). With similar benefits to AI and ML, IoT enables you to create fully connected supply chain networks that streamline operations and increase visibility. Internet of Things offers advanced data-tracking capabilities, including the use of sensors and barcodes.

Lastly, use cloud computing technology to improve data visibility and access. With a cloud platform, employees have easy access to important information and data. This makes it easier for them to fulfill tasks, communicate better, and reduce delays related to missing data and documentation like Proof of Delivery or Proof of Shipment. Cloud-based operations enhance connectivity, immediacy, and efficiency, and they make your operations more scalable.

8. Institutionalize sustainable practices

Sustainability and efficiency work hand-in-hand. There is a call for organizations to focus on waste reduction and to carbon-neutral shipping. Promoting sustainability in your operations has many benefits including cost reduction and customer satisfaction as more customers turn to green businesses.

There are many ways to practice green business including using zero-emissions delivery vehicles, switching to eco-friendly packaging, and planning shorter, smarter trips to reduce fuel usage.

9. Educate your staff

You can’t improve your supply chain efficiency without involving your employees. While software can account for some changes in your process management, you also need to get workers on board. Your employees manage, control, and contribute to your processes; thus, you must educate them about changes in your operations.

Establish a training program to teach workers about these changes. Through understanding, your workers can complete their tasks with more consistency and accuracy. You must also provide ongoing training and development opportunities so that employees continuously enhance their skills and knowledge.

10. Evaluate & improve

You cannot implement the steps above once and think that your supply chain will function efficiently forever. Rather, you need to analyze and revise processes regularly to maintain efficient operations.

Collect and assess data often to observe patterns in your supply chain performance. Use data insights to identify improvement areas and make better decisions for your business. Take advantage of reporting features in your chosen software solutions to guide you on how to continuously improve your business processes.

It may even be worthwhile to schedule regular inspections and employee check-ins to find out how they feel about the changes and if they have any suggestions to help improve processes.

Metrics to measure supply chain efficiency

The steps above highlight the important role of data and analytics in supply chain management. There are many types of metrics that your business can analyze and they all give measurements of your performance. The main metrics you should monitor are below.

Quality

Quality metrics measure the standard of the product your business offers. They help you identify the good aspects of your product quality and those that are lacking. With this information, you can pinpoint the stages in your supply chain that affect product quality. For example, you could have a bad supplier or the packaging may not adequately protect the product.

Another aspect of quality is the effect it has on customer satisfaction. Poor product quality ruins the customer’s experience and decreases their satisfaction. Your service can also impact customers’ quality of experience. Delays and issues leading to late or bad deliveries reduce the quality of the service you provide.

Time

Most businesses working in the supply chain and logistics industries understand the importance of tracking time metrics. Time metrics help you better gauge productivity levels and they point to the level of your supply chain’s efficiency. The kinds of time metrics your business can look at include on-time delivery, order processing times, order fulfillment times, delivery times, and more.

Cost

Measuring the costs related to different actions and aspects of your operations allows you to measure your business profitability. When you know how much things like inventory transportation cost, you can identify where there may be unnecessary expenditures. You can also plan processes better with cost reduction in mind. The focus here is to reduce operational costs so that your business becomes more profitable.

Bottom line

The efficiency of your supply chain depends on the accurate execution of processes. It also relies on well-structured systems and strategies for supply chain management. Without good processes and systems in place, your business cannot operate efficiently.

By sticking to the steps above, you can improve your processes and enhance your business efficiency. These steps show you how to improve inventory, warehouse, and order management. They also cover tips to increase visibility across your supply chain by using data and analytics.

Automation, AI and machine learning, the Internet of Things, and cloud computing offers supply chain performance capabilities to transform your operations.

These efficiency strategies contribute to lower costs, reduced waste, and more sustainable processes. Plus, they’re easy to implement and even easier to monitor. Use them to improve your supply chain efficiency today.