10 Supply Chain Optimization Best Practices

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by Stephen Gould
February 11, 2022

With offices and trusted partner facilities strategically placed around the globe, the experts at Stephen Gould can transform your global supply chain and offer unparalleled insight into all manufacturing operations. We provide supply chain services including Sourcing Analysis, Supplier Selection and Onboarding, Procurement Planning, Performance Analysis and Risk Optimization.

Supply chains are the lifeline for businesses. Supply chain optimization refers to a set of processes by which the performance and efficiency of supply chains are evaluated and improved over time. Optimization is based on key performance indicators including total operating expenses and gross margin return on inventory invested. The goal is to maximize profits by delivering products to customers at the lowest possible cost.

Nearly 80% of companies implement supply chain optimization techniques. For many companies, supply chain optimization is a crucial competitive advantage and key to their long-term growth objectives. As ecommerce continues to grow and shape consumer expectations, an efficient supply chain is essential to offering a quality shopping and post-purchase experience.

This guide provides an overview of supply chain optimization best practices and the benefits of investing in these key upgrades.

Benefits of Supply Chain Optimization

Optimized supply chains allow you to adapt to challenges and fluctuations in consumer demand without steep increases in cost, leading to numerous benefits throughout your business.

Here are some ways that supply chain optimization can positively impact an organization:

  • Improved inventory management: Keeping close tabs on inventory is essential to meeting demand and reducing costs. Optimizing inventory management prevents products from being out-of-stock for long periods of time, as well as reducing the amount of excess inventory sitting in storage

  • Better order fulfillment: Efficient and effective delivery is key to customer satisfaction. Fulfillment can often be improved significantly by identifying better delivery and transportation options.

  • Optimal decision-making: Improved analytics helps reveal opportunities for greater cost savings and more streamlined operations so you can choose the best path forward.

  • Reduced operating costs: Examining areas like planning, team management, sourcing, transportation, and last mile delivery often reveal opportunities for additional savings.

  • Enhanced customer service: Reliable, on-time deliveries lead to fewer returns and reduced customer service costs.

  • Better supplier relationships: Streamlined supply chains are often the result of close collaboration with key suppliers that make it possible to reduce inventory, accelerate fulfillment, and ensure product availability.

Identifying Problem Areas in Your Supply Chain

Many supply chains have been drastically impacted by the COVID-19 pandemic. Logistics companies have had to adapt quickly to the surge in ecommerce and subsequent price increases for fuel, warehousing, and more.

Supply chains must continue to adapt and evolve in response to external economic and political factors. As the business context shifts, new problem areas are often revealed. In order to respond proactively, supply chain managers must learn to identify and anticipate challenges and roadblocks that impact production, fulfillment,

Here are some common areas where supply chain challenges are likely to occur:

  • Efficiency: Identifying and eliminating bottlenecks or delays leads to cost benefits throughout the supply chain.

  • Inventory Management: As new markets and channels emerge, inventory placement and warehouse locations may need to change to be closer to customers.

  • Demand Forecasting: Anticipating demand allows you to more accurately and cost-effectively source and distribute goods.

  • Risk Mitigation: With the right tools, forecasting, and relationships, many supply chain disruptions can be anticipated, allowing you to build in greater resiliency.

  • Customer Expectations: Customers expect items to be in stock, delivery to be fast and on time, and delivery status to be readily available, all of which strains operations, increases costs, and leads to a greater need for technology.

10 Best Practices for Supply Chain Optimization

Here are some common approaches for optimizing your supply chain.

  • 1. Outsourcing Business Activities

    In many industries, it is nearly impossible to compete without outsourcing parts, if not the entirety, of production and fulfillment. Overseas partners are often more equipped to offer a higher quality service at a significantly lower cost than keeping production in-house. Processes like procurement, logistics or customer service can also be outsourced to third parties with expertise in those areas.

  • 2. Building Strong Suppliers-Retailer Relationships

    Establishing communication across the supply and retail channels is one of the most important aspects of supply chain optimization. It is crucial to have good, transparent communication between a retailer, supplier and manufacturer. Excellent communication contributes to timely fulfillment and satisfied customers.

  • 3. Leveraging Online Communication

    Technology has made it possible to better understand customers and communicate quickly and directly with them. Online marketing channels give retailers a direct line to customers and allow them to offer targeted services and discounts that increase sales. Social media gives companies a glimpse into how customers use products as well as insight into emerging trends, contributing to demand forecasting efforts.

  • 4. Implementing Real-Time Supply Chain Management Software

    Supply chain management software makes it possible to coordinate multiple business departments by organizing up-to-the-minute data on inventory, sales, and more. This streamlines communication and decision-making throughout the organization by ensuring everyone is working together from the same information.

  • 5. Using a Multichannel Approach for Supply and Demand

    Multichannel supply chains provide customers with many purchasing options, from brick-and-mortar stores to ecommerce. A multichannel approach allows you to satisfy demand and keep items available for purchase, even if one or more channels face supply shortages or demand increases.

  • 6. Ensure High-Quality Products

    Not all manufacturers and suppliers are created equal. Understanding the strengths and limitations of supply chain partners will help you find the right partners that best fit your product. It’s crucial to shop around and extensively vet prospective suppliers and manufacturers to achieve long-term cost benefits.

  • 7. Plan Ahead

    Projecting demand and planning ahead can help keep logistics running smoothly and minimize additional expenditures like last-minute order fulfillment. Effective inventory management and order fulfillment will reduce the likelihood of bottlenecks and delays.

  • 8. Align with Customer Demands

    Understanding shifting customer needs and desires will assist in predicting where the market is going and what you need to do to keep your stock at appropriate levels. Analyzing your sales data will provide insight into demand trends and help you and your partners be ready for new developments.

  • 9. Use Analytics Tools

    There are a number of data analytics tools that can help you better understand your customer. Analytics are invaluable in making decisions about new channels, product lines, and sales strategies.

  • 10. Negotiate and Renegotiate

    Maintaining your competitive advantage means continuing to negotiate for the best rates possible with your suppliers. When an opportunity to renegotiate presents itself, it’s in your long-term best interest to try to work out a better cost structure.

Grow Your Business with Supply Chain Optimization Best Practices

Stephen Gould can transform your supply chain and provide unparalleled insight into all supply chain operations. Whether you need full end-to-end supply chain optimization or focus on a specific area, our experienced team can help you improve performance and efficiency. Our services include Sourcing Analysis, Supplier Selection and Onboarding, Procurement Planning, Performance Analysis, and Risk Optimization.

Ultimately, supply chain optimization is about customer satisfaction. Our experienced team understands what it takes to streamline operations and continuously improve all aspects of production. We can help you better understand how your supply chain works and provide full turnkey solutions that will help your business grow.

Contact us today to learn more about our supply chain optimization services.