Supply Chain Optimization Basics for Wholesale Distributors
Supply chain optimization, or the process by which a company improves the way it manufactures and distributes its products to end customers, is a constant battle among wholesale businesses that requires continuous monitoring and adjustment. From production planning and materials sourcing to transportation and warehouse management, getting all of these constantly moving parts to flow efficiently, economically, and cooperatively can be a massive undertaking, often involving many disparate entities that are difficult to control, including third party suppliers, manufacturers, and transportation providers. In general, the goals of an optimized supply chain include:
- Meeting demand whilst minimizing uncertainty.
- Transporting and storing goods at a low cost.
- Delivering product quickly and punctually.
Wholesalers, after all, are only as efficient as their supply chains allow, and a supply chain is only as efficient as its weakest link. Regardless of how high market demand is, supply shortages, logistical inefficiencies, and low fill rates can have detrimental effects on any wholesale brand. Here are some basics to help you find and fill gaps in your own supply chain.
6 Supply Chain Optimization Basics
1. Improve Forecasting
Supply Chain execution is all about responding to demand. To those outside the trenches, it sounds like a simple enough prospect. Challenges arise, however, from the variability of demand in different markets––often leading to either inventory shortages or excess. Forecasting is therefore extremely important to an optimized supply chain. In industries where demand is uncertain, production and distribution must be more directly coordinated with customer demand. Where demand is stable, however, manufacturing forecasts tend to reach farther out into the future, making cost reduction especially important. There are also hybrid strategies that involve partial product assembly (based on aggregate demand forecasts), with final assembly occurring in accordance with customer demand for specific product configurations.
2. Streamline the Order Submission Process
In addition to the flow of goods, information flows are also key, especially for businesses where demand is volatile and requires a shorter reaction window. It’s often the case, for instance, that the sales arm of the business takes orders from retailers in the field, but are delayed in submitting those orders by fax, email, data entry, or phone call. These sluggish information flows cause a supply chain lag that makes it incredibly difficult to adjust to increases and decreases in demand, leading to inventory shortages and cumbersome backorders. To mitigate these issues, wholesalers may unnecessarily hold excess inventory, clogging warehouses and driving up costs. By automating the order submission process, wholesalers can flexibly store and deliver products much more efficiently.
3. Don’t Let Automated Processes Go Unchecked
Automation is great for streamlining processes that once required manual intervention. It’s important, however, to continuously audit and reconcile those automated processes. Letting them go unchecked will lead to a dangerous lack of awareness and understanding on the part of your team, allowing your supply chain to fall behind your business objectives.
4. Encourage Cross-Functional Cooperation
Your supply chain impacts (and is impacted by) people and departments across your organization, and requires cross-functional cooperation––from sales to finance, R&D, and operations––to deliver results. If these functional areas remain siloed, conflicts will inevitably arise over disparate priorities and expectations. Collaboration and cooperative planning are key.
5. Optimize Inventory
At the heart of supply chain management is the effective balancing of supply and demand. It’s all about having the right amount of inventory, in the right places, at the right time. This requires synergy between sales and logistics––giving sales reps access to inventory data in real time so that they can sell more strategically. It’s also a matter of consolidating and tracking inventory information across all of your sales channels, knowing what you have in your warehouses at all times (and what it’s costing you), and removing the excess when necessary.
A successful supply chain strategy should always have room for adaptation––to increased productivity, process changes, the acquisition of new brands or lines, the addition of new suppliers, etc. Supply chains also have to adapt to changing market expectations––shorter shipping windows and faster deadlines, the ability to ship product in smaller, more flexible quantities, and the burgeoning B2B eCommerce trend. Always keep this in mind as you design and optimize your supply chain for the time being: how easily will you be able to modify it if needed? Supply chain tips to share that weren’t covered in this list? Let us know in the comments!