Most businesses already have at least one person on staff whose sole responsibility is to ensure effective supply chain management. However, even with this measure in place, multiple inefficiencies in the supply chain may still be present. Fortunately, even if a business is unable or don’t have the time to hire a professional supply chain analyst to conduct a thorough review, procurement directors can often identify and resolve these inefficiencies by performing a supply chain analysis of their own.
Why You Should Conduct Your Own Audit
Even if you can’t justify the spend on a professional analyst, even a basic examination by a well-prepared layman can help resolve inefficiencies in the chain that may be diminishing profitability. And your review may also bring a number of additional benefits:
- Better understanding of each component of supply chain operations.
- Faster, more reliable movement of products.
- Improved customer service.
- Fewer wasted resources.
While it may take the eye of a professional to uncover deep-rooted waste and inefficiencies, procurement directors who conduct regular audits on their own can keep their supply chain running smoothing, resolving problems before they arise and saving their company valuable time and money.
Start with the Basics
According to Intuit, the makers of business intelligence software QuickBooks, there are three primary supply chain metrics that must be reviewed during analysis: cost, time and service.
- Cost: the amount of money the company is spending to acquire what it needs in order to operate.
- Time: the amount of time it takes a given company to perform various tasks in the supply chain.
- Service: the quality of service a company (either you or your vendors) provides to customers.
When reviewing each of these areas, the goal is to evaluate current performance and determine strategies for improving supply chain management in the future.
As a procurement director analyzes the supply chain, he or she may notice any number of opportunities for improvement. However, some inefficiencies are more common than others. According to the Kurt Salmon, most companies see supply chain inefficiencies in the following areas:
- Poor communication. Failing to communicate effectively with vendors and/or suppliers can lead to wasted time and resources, as well as delays that may impact customer service. Resolving this issue often requires you to optimize information sharing and other interactions with your third-party providers.
- Errors. Errors in the supply chain, such as a defective product or pricing inaccuracy, cost your company more time and money. To improve this inefficiency, procurement directors should look for ways to not only reduce specific errors, but also strategies for quickly identifying and resolving others when they occur.
- Lack of data. Some companies suffer from supply chain inefficiencies because they fail to collect all the data they need to evaluate and/or improve the efficiency of the chain. Resolving this problem requires the development of better data collection strategies for all business processes that may affect the supply chain.
- Poor data management. Simply collecting relevant data isn't enough to ensure supply chain efficiency. You must also be able to store, organize and analyze this data effectively. Some businesses can improve the efficiency of their supply chains by simply putting the data they have already collected to better use through improved data management and analysis.
- Poor flexibility. In order to thrive, businesses must be able to adapt to changing circumstances or requirements quickly. A rigid, inflexible supply chain prevents your business from responding to changes easily, which can lead to decreased profitability and other problems.
Regardless of your company's size or purpose, effective supply chain management is essential to success. Regular analysis of the supply chain from one end to the other allows procurement directors to identify and resolve problems, increase the efficiency of the supply chain and improve overall profitability.