Supply chains can be complicated in the best of times. Even ordering a cup of coffee can easily pass through four or five hands by the time we receive it from our local cafe, writes Jason Toshack, General Manager ANZ at Oracle NetSuite.
The process would typically include harvesting, roasting, ordering, distribution and eventually delivery to the coffee shop. That’s a lot of steps for a relatively straight forward product. Now consider how complex this process can be for something such as consumer electronics, which have complex indexing procedures with supplies being shipped all over the world.
Supply chain optimisation can pay big dividends as businesses that have timely access to stock are able to continue trading with minimal interference when external circumstances threaten to disrupt operations.
Here are three things to keep in mind when evaluating the effectiveness of your supply chain.
Is ‘just in time’ still viable?
It is easy to see why many businesses use a ‘just in time’ system. By ordering inventory as it is needed, and not to the point of excess, businesses save costs on warehousing, free up valuable shelf space and avoid spoilage. Many supermarkets have selected this process to cut down on food wastage.
However, last year’s drive to stock up on necessities put significant pressure on supply chains. Systems struggled to keep up with the demand, leading to weeks where many were unable to access basic supplies as a result of delivery delays.
Does this mean ‘just in time’ is now dead? The answer to this is not so simple as yes or no. Here are three areas for proactive business leaders to prioritise to protect and optimise their supply chain:
Bulk the chain
No business wants to stockpile products to the point of excess, potentially leading to over-supply with little demand, but the past year has shown us the weakness of relying on ‘just in time’ alone. Many businesses have left no room in the supply chain for unexpected significant demand, and as needs can be unpredictable, forward-looking business leaders will build resilience into their supply chain. It should come as no surprise then that having more stock than previously is now a preferred option, and that under and oversupply will remain a balancing act that will require fine tuning over time.
Simplify where possible
There will always be defined processes and logistics that are specific to certain locations. Going back to the coffee example, beans only grow in some climates, so moving crops elsewhere would not be feasible, but there may be other processes that can be consolidated and streamlined. While such optimisations may be more costly in the short-term, the longer-term benefits of less complication – and risk – could well outweigh the investment. It would be useful for business leaders to work with their supply chain managers and finance teams to forecast the costs and benefits of implementing such a change. Proactive CFOs also use scenario planning tools to predict and quantify the impact of disruptions throughout the supply chain.
Data is your ally
Taking optimisation a step further, it is important that everyone in the business have access to the same, real-time data to keep the supply chain running efficiently. Knowing at all times where stock levels are at, while also managing inbound supply versus demand becomes paramount and having insights into where everything is at in the chain remains key.
In addition, finance teams will require up-to-date figures for balance sheets, profit/loss and financial modelling, while the CEO needs to see the big picture – where is the business headed and what decisions need to be made. Siloed data, or data stuck in spreadsheets won’t allow for effective or agile decision making that is necessary to manage a business.
As the last year has shown us, one issue in your supply chain can cause prolonged delays, with detrimental impact across a business. If your current business processes do not provide such visibility, it’s time to consider a cloud-based enterprise resource planning (ERP) system, which gives an organisation access to the same information, allowing seamless collaboration across the board. Before committing to a solution, ensure the technology is truly cloud-first and investigate the extent to which it integrates with other systems.
Supply chain optimisation impacts every level of the business. Forward-looking business leaders understand that they can’t rely on antiquated processes. Instead, look for ways to add a safety net to the supply chain, simplify operations where possible and invest in technology that will give the team the information they need to make timely decisions.
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