Without focus, things can go wrong. It’s important to find the key areas in your supply chain that need attention.
But what exactly should you focus on, and how can this help your business?
Watch the full video to learn how focusing on the right things can make your supply chain more efficient and lead to better results overall.
To improve your supply chain, focus on these five key areas:
Conducting a Cost to Serve Analysis
The first critical step is to conduct a cost to serve analysis. This analysis helps identify and address profit and cash leaks within your supply chain. It’s especially crucial in today’s cost-conscious environment where financial pressures are high. By performing a cost to serve analysis, you can uncover areas where money might be slipping away unnoticed. Many organizations are surprised to find that a significant portion of their orders may be losing money. For example, I’ve encountered cases where up to 80% of orders were leaving the warehouse at a loss. Understanding and fixing these leaks is essential for improving profitability. If you haven’t yet undertaken this analysis, I recommend checking out our 14-minute video guide. It provides a comprehensive overview of how to conduct a cost to serve analysis and make meaningful improvements.
Reviewing Your Distribution Network
The next focus area is reviewing your distribution network. Distribution networks can become outdated as organizations grow and evolve. It’s important to assess how products flow through your network and how many times they’re handled. Inefficiencies in product flow, such as excessive handling or unnecessary touches, can lead to increased costs and delays. Additionally, evaluate your stockholding locations to ensure they are strategically placed to meet current demands. An outdated network might not align with your current business needs, affecting overall efficiency. Regularly reviewing and updating your distribution network can result in significant improvements in both cost and service levels, enhancing overall operational performance.
Assessing Inventory Levels
Effective inventory management is another crucial area. The recent trend of increasing inventory levels, driven by various factors including supply chain disruptions, has led many organizations to experience imbalances. Common issues include overstocking some items while running short on others. Proper inventory management is essential for maintaining a balanced stock across different categories and service levels. This balance helps meet customer demand while minimizing the costs associated with holding excess inventory or dealing with shortages. Regularly reviewing and adjusting your inventory management practices can prevent these issues and ensure that your inventory levels are optimal.
Balancing Stock Across Categories
A balanced approach to inventory across various categories and service levels is vital. Ensure that your inventory management strategies are effective and adapt to current market demands. This involves not just maintaining overall inventory levels but also ensuring that stock is appropriately distributed across different product categories. Addressing these imbalances helps avoid issues like stock-outs or excess inventory, which can disrupt your supply chain and affect customer satisfaction. Effective inventory management is crucial for maintaining smooth operations and ensuring that you can respond quickly to changes in demand.
Related articles on this topic have appeared throughout our website, check them out:
- Top 6 Supply Chain KPIs: Keep Your Dashboards Simple
- 3 Common Inventory Management ‘Sins’—And How to Avoid Them
- Cost to Serve at a Glance: 9 Steps to Success & 5 Mistakes to Avoid
- 10 Reasons to Review Your Distribution Network Design
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated July 5, 2023, under the title “Top 3 Things Organization Should Focus On“.
