The Basic Guide To Supply Chain Optimization

Supply Chain Optimization Plan for Startups and Growing Firms

Supply chain of any company is something that gives business the opportunity to realize increased short and long-term cash flows and cost savings. Especially now, organizations should focus on Supply Chain Optimization even more due to the current economic scenario.

Therefore, supply chain of an organization should be constantly monitored and optimized keeping up with the latest best-in class technologies and procedures. and this should be done (whether for startups or established firms) in such a way which handle business growth efficiently, achieve more savings, and provide better ROI.

Below are some step by step suggestions and few benefits explained to make the case for any organization to start their mission Supply Chain Optimization.

Steps to Optimize Supply Chain :

1. Eliminate Paper Based Procurement:

This will quicken up Organization’s Supply Chain Optimization process, as compared to keeping those paper based POs and Approval records.

Just a thought with an example:

  1. Buyer needs to make a Purchase Order.
  2. He then has to run to the office of approver.
  3. Wait for approver to finish his meeting or whatever task he is doing and then explain to approver why he needs to sign the PO.
  4. And, when he finally gets it signed — it’s time to leave the office… for supplier and you.
  5. Well, not really! but on average, buyer who pushes papers around, wastes about 3–5 hours per week… Ha! Too much time wasted of your important buyer… this time could have been utilized working on strategic supplier relationship building, strategizing the next big negotiation to save organization some big bucks! So, this paper pushing technique is outdated and not kind of optimization that will give the business best ROI… Right!?

Therefore, choose paper-less procurement via introduction of Web Based Central Purchasing System. This will help business to quicken approval routings, become data driven, and centralize the International Procurement especially for CAPEX.

2. Involve Sales in your “Mission Supply Chain Optimization”:

- Demand Forecasting and inventory planning should be liaised with sales regularly. For this purpose, business need to identify key sales forecasting methods, which are in use and fine tune those in terms of inventory planning and categorizing database of suppliers.

- Fine tuning sales forecast methods would get business geared up to implement Collaborative Planning, Forecasting, and Replenishment (CPFR) process with key suppliers to slash inventory storage requirements to minimum levels.

3. Choose and/or Customize Simple Software:
  • If you already have software in place but you know (via traceable survey) that your SCM Department, Accounts and ordering Territories neglect to use it properly, it’s time to customize that software.
  • If customization isn’t the option on previous software — then build an in-house easy to access, user-friendly and simple web based solution with the help of in-house IT staff or outsourced software developing company.
  • This should help in tracking and updating global inventories. This will also help in maintaining database of suppliers, using which Suppliers can be categorized. Categorization should be in terms of fulfillment time and price, as quality should be the mutual top factor in both of these categories.

General Benefits of Supply Chain Optimization:

Here are some motivators for Organizations to opt for Supply Chain Optimization:

1. Earlier the requirement of equipment is known, we can reduce cost on procurement especially on CAPEX by more than 30% — This figure varies for each business depending on previous spend management and procurement practices.

2. Because of suppliers’ categorization, an automatic competitive system comes in place. Through this, correct and earlier forecast providing territory gets the benefit of getting same equipment but with lesser price, which can powerfully affect ROI eventually.

3. CPFR method implementation with key suppliers would help to order JIT (Just in Time) inventory. Which means that for suppliers this would not become as surprise order, as they would have been already collaborated all through organizational forecasting progress. Businesses need to share equipment related info only and subtracting the location or which contract they need it for, to keep their confidentiality as well.

4. The first and foremost reason for inventory buildup is the lack of end-to-end visibility in the supply chain and second reason is not have enough credible suppliers enrolled who can help cut excess inventory storage. Benefits of introducing web based inventory solution would help in:

* 15–20 percent inventory reduction by improving visibility of inventory across the supply chain

* Reducing inventory buildup by 6–8 per cent through improved visibility on material scheduling.

5. By eliminating paper based procurement processes and by becoming data driven, organization would help increasing complete visibility of inventory, past and current purchase trends to stakeholders and management. Moreover, with the data generated — vendors can be rationalized; contracts can be negotiated better, as complete financial picture — completely updated in real time — would be available with easy access.

Overall, Procurement would be more efficient and pain-free. Purchases would be tracked down quickly, and approvals would be routed systematically. In addition, all this info would be available over secured web which can be securely accessed globally from anywhere for larger operations.

Supply Chain Optimization Benefits Summary:

Lesser supply chain staff to employ and all supply chain links can be tracked, managed, and directed from single office.
Moreover, this system would be poised to handle growth efficiently.

Actions Needed to Initiate Process of Supply Chain Optimization:

Ensure broad acceptance of the changes
Secure senior-level executive support to drive these initiatives
Involve cross-functional teams to provide support
Leverage appropriate technologies that enable the new processes.

I am positive that by keeping above steps in agenda of Supply Chain Optimization, businesses can make better decisions related to SCM, Procurement Spend Management, Inventory Planning, and Management, quickly and with ultimate confidence.

Hope this helped and if any questions, let me know. I would be happy to be of help.

About the author: Adeel Hassan Imrani is a seasoned supply chain management professional with experience managing Oil & Gas, Telecom, and Construction equipment for 13 Countries — for six years.

Adeel Hassan Imrani

Adeel Hassan Imrani is a respected strategic sourcing and procurement professional based out of Dubai, UAE and Karachi, Pakistan. He creates competitive advantage through innovative sourcing strategies that focus on holistic value creation. Adeel’s ability to drive leading edge strategies has a proven track record of tangible bottom-line value and top-line growth.