3 Strategies for Improving Your Supply Chain
The Center for Supply Chain Innovation at Auburn University recently released their annual State of the Retail Supply Chain Report that summarizes current supply chain management (SCM) challenges according to 76 retail executives and supply chain leaders. The report boils the insights down to three capabilities that operational leaders should focus on to improve their supply chain: omnichannel integration, supply chain analytics and monetizing fulfillment.
As an executive in the study stated, “A good plan today is better than a perfect plan tomorrow.” How do you plan to improve your supply chain? We detail the challenges and offer some tips to get started below.
Areas of Focus
- Omnichannel Integration
As customers continue to shop using multiple channels, such as brick-and-mortar, online and mobile, you need to improve your omnichannel strategy to keep them coming back. This creates a seamless shopping experience and makes it simpler for shoppers to bounce from one channel to another.
It’s challenging to carry out primarily because of traditional, channel-centered inventory silos. The study indicates that inventory allocation, a key to successful omnichannel integration, is the highest priority among operational leaders. Currently, only 24 percent of the responding companies have successfully allocated their inventory while 87 percent believe they will achieve this in three years.
- Supply Chain Analytics
Most operations have the right technologies in place to collect data on things like machine conditions, demand forecasting and overall supply chain health. The challenge is analyzing the vast amount of data that’s collected and transforming it into actionable insights.
One main reason behind this challenge: lack of talent. Companies haven’t made significant progress in acquiring talent with SCM and analytical skills. About half of the interviewed supply chain executives reported limited progress in hiring experienced workers with only 16 percent of the respondents making extensive progress. There simply aren’t enough people with the strategic thinking and program management experience in the industry.
- Monetizing Fulfillment
Your customer service should not come at the expense of your fulfillment costs and you shouldn’t have to prioritize one over the other. But, in reality, traditional supply chains are not properly managed or equipped to fulfill single orders as efficiently as filling large store orders. Nearly 60 percent of supply chain leaders interviewed believe it isn’t possible to recover fulfillment costs and 70 percent believe the fulfillment process, including delivery, eats into gross margins.
Related to the first focus area, omnichannel retail gives consumers the ability to order from multiple channels established by the retailer and, as a result, order more frequently. An increase in online orders coupled with a poor fulfillment strategy during a time of rising shipping costs and return management issues results in negative effects on your bottom line.
The report suggests that retailers’ supply chain success ranges from a healthy state to struggling to survive. If your operation falls somewhere in the middle, it’s time to re-strategize and improve the above capabilities in your supply chain. But where do you start? Here are some ideas:
Most operational leaders look for ways to cut costs; strategic operational leaders look for opportunities within their fulfillment and distribution operations to invest. With the current talent shortage, investing in your workforce is now more important than ever. Whether it’s adding more workers to pick and package orders faster or enlisting the help of a staffing partner to increase scalability and efficiency, a more productive workforce gives you a competitive edge.
Technology is another key area of investment. Leveraging the right technologies based on your operational needs can boost performance while reducing inaccuracies and costs. Not sure what you need? Check out our post about must-have technologies for your warehouse operation.
Optimize Inventory Management and Demand Planning
Technology research firm Gartner indicates that a lack of demand visibility is one of top challenges impacting the supply chain and a company’s growth depends on its ability to meet demand. Inventory management and demand planning go hand in hand; if one is inaccurate, the other will suffer.
Demand planning works best when there is collaboration between leaders from various teams within the company, like sales and operations. Technology can tell you a lot about your customers’ habits but these teams will likely have valuable insights to add based on their experience that can’t be captured by technology. It’s also key to track economic trends and historical data from your company to help paint a better picture of future demand.
Inventory management can be congruent with demand management. Management consulting firm Bain and Company highlights several ways supply chain leaders can strengthen their inventory management. An example is analyzing why excess stock exists and creating an action plan to reduce future overstock while forming a task force to determine how to sell the excess inventory more effectively. An improved system minimizes the potential risk of wasting money and storage from overstocking.
In the future, especially in particular industries, on-demand additive manufacturing could make a big impact on inventory management and demand planning. Make sure to keep tabs on new technology developments and what they mean for your supply chain.
Outsource Non-Core Processes
Outsourcing a portion of your supply chain will allow you to focus and further improve on core business areas. For example, some companies are turning to business process outsourcing firms to reengineer operational processes for optimal efficiency and productivity while others are discovering the advantages of outsourcing their warehouse staffing within their own facility to an experienced staffing provider.
In both instances, you build a partnership with a company that can offer you expertise in an area you may have less operational knowledge of. This will help you free up resources and time that can be allocated elsewhere.
The Future of Your Supply Chain
Retailers can no longer depend solely on cutting costs to survive. Instead, companies should look for areas of improvement within their supply chains to invest in. Strategic investments can foster growth and monetize your fulfillment and distribution operations.
Operational leaders who can effectively remove inventory silos and integrate channel-specific strategies will advance their omnichannel approach. This will not only improve inventory management but will make your supply chain more transparent leading to a more positive shopping experience for your customers no matter what channel they’re using to make a purchase.
Finally, it’s rare for a company to excel at every supply chain process so consider outsourcing non-core aspects to an experienced third party. Doing this will free up additional time and resources that can be dedicated to the other areas of your operation.