Efficiency is a perennial business buzzword. After all, it describes the very best of business practices across the board. Efficient production means making products without wasting materials, natural resources or man hours. Efficient facility management means running your business while reducing your energy costs and minimizing its carbon footprint. Efficient advertising means targeted ad campaigns that make the very most of your marketing dollars.
And while efficiency may be a well-worn tern, the digital age has seen a new buzzword rise to prominence: responsiveness. Responsiveness allows businesses to act and react swiftly to change—both internally and in the marketplace.
Both are solid characteristics, but can one be more important than the other? Is it time to put efficiency on the back-burner in favor of responsiveness?
When it comes to the supply chain, the answer is complex.
Supply Chain Efficiency in Action
Efficiency saves money and increases profits throughout your business, but an efficient supply chain can be particularly beneficial to your bottom line.
An efficient supply chain gets your products to their destinations in the most cost-effective way. In today's global marketplace, this is essential. Your supply chain costs are a major part of your overhead, which are expressed in the prices you ultimately offer to your customers. If your supply chain adds unnecessary expenses to your end products, then your ability to successfully compete with others companies offering the same products is effectively hobbled.
It's as simple as this: if your competitors have more efficient supply chains than you, they will be able to offer the same products for less.
Hallmarks of an efficient supply chain:
- Optimization. This can include optimized shipping routes, warehouse locations, personnel and even your computer network to get the best and fullest use out of your existing infrastructure. Half empty trucks, unused warehouses and redundant computer systems are simply a waste of your assets.
- High quality partners. Your third party logistics partners need to be the best of class. Your 3PL should have state-of-the-art technologies at their disposal, have a policy of transparency, and have a proven track record.
- Inventory management. Too much inventory is costly to purchase, handle, store and track. Too little inventory can be costly, as well. It can mean lost production time, expensive last minute orders and even angry customers. An efficient supply chain finds the right balance when it comes to inventory.
- Customer satisfaction. Supply chain efficiency is directly linked to customer satisfaction. It gets your products into the hands of the people who need them quickly and at the best price.
The Responsive Supply Chain
A responsive supply chain has to do two things: it has to be responsive to your needs, and it has to be responsive to the needs of your customers.
- Order-fill accuracy. In today's highly competitive market, a guarantee of quick deliver is a real selling point. If that order arrives quickly but is inaccurate or incomplete, then you've wasted time and money and may have lost a customer as well.
- Scalable fulfillment. All businesses experience ups and downs. Sales can be affected by the season, the weather and the economy. A responsive supply chain is one that can accommodate changing sales volumes.
- Communication. When you— or your customers— have questions, problems or concerns, it's vital that there be open lines of communication.
- Customer satisfaction. People can sometimes throw a monkey wrench into to the best supply chain. They order the wrong thing. They change their minds. They need something sooner, not later. This is when a responsive supply chain really shines. It is flexible enough to handle returns, for instance, and offers high-quality customer service. Customers who feel that their specific needs are being met, and who can reach out for help when there is a problem to be solved, are satisfied customers.
How are the two interconnected?
Did you notice the overlap? Customer service.
Some business experts believe that responsiveness and efficiency are polar opposites. Supply chain efficiency requires speed, and large, uniform orders. Responsive demands a slower pace, and, sometimes, customized orders. But they both serve the same end goal, and both are equally important. So how do you incorporate one without sacrificing the other?
A quote from a recent article from Supply Chain Movement aptly captures the current wisdom: "As responsive as required, as efficient as possible."