Supply chains are a highly-complex, yet very necessary, ingredient to nearly any successful business venture.
An efficient supply chain requires detailed knowledge of the minute mechanics behind each step of a product's journey, plus a big-picture understanding of how those mechanics effectively support the process as a whole—which is where supply chain management comes in.
The concept of supply chain management encourages professionals to consider every step, from sourcing and manufacturing to distribution and sales. Ultimately, a well-oiled supply chain should reduce costly time delays in product distribution, and facilitate better profits for a higher ROI.
However, in order to be effective, even the best supply chain managers need the support of the right tools. Several studies have found that, companies that embrace an efficient supply chain management system are more likely to see larger returns than companies with unorganized methods.
In fact, AMR research in Boston discovered that companies with poor supply chain management solutions managed an average return of around 3.53 percent, whereas those rated as the most supply-chain-efficient, achieved a return of 17.89 percent in 2007.
Here we’ll dive into some key supply chain risks that business owners and supply chain managers should be on the lookout for, as well as some of the best software solutions to address those risks and maximize business profitability.
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Supply Chain Risks
When attempting to get the most out of a small budget, it can be easy to overlook the risks associated with supply chains. Whether global or local, companies must constantly be aware of each aspect of their supply chain. Survey information taken from the University of Tennessee suggests that, unfortunately, most companies (90 percent) aren't as cautious as they should be, and fail to consider the risks in their supply chain.
Because each supply chain is a complex collection of links: people, companies and procedures, there are numerous distinct sets of potential vulnerabilities and risk factors. As a system of interacting parts, when one part of the supply chain falters, the rest are prone to disruption too, leading to huge financial losses, and even damage to your company's reputation.
In order to keep every part of the business running smoothly, suppliers, manufacturers, and retailers must be able to manage supply chain risks. This process begins with considering internal data, and the tools that are available. For example, the best supply chain tools will give you the ability to integrate third-party data (i.e. traffic, consumption, supplier lists, etc.), generate predictive analytics, and view a complete picture of your current supply chain.
Analytical and Software Solutions
Analytics power the heart of any supply chain management solution—assisted by tools for facilitating collaboration and optimization in a workplace. Fundamentally, businesses should think of the network of processes, facilities, and people involved in the manufacture of a service or product as an unbreakable chain—rather than a group of interrelated separate tasks.
The larger a company becomes, the more complex their chain will be—however all organizations must consider the same three aspects of supply chain management:
- Planning: Interpreting a strategic management of resources in meeting customer demands for a service or product. In other words: what you hope to achieve with your supply chain.
- Evaluation: Gaining better visibility into the different parts of the supply chain and determining areas in need of improvement - to allow for better performance, higher efficiency, and reduced waste.
- Monitoring: Watching for discrepancies within the function of the supply chain to mitigate errors and ensure that consumers receive the right services or products according to the right schedule.
A strategic plan for supply chain management can help companies to predict, prevent, and manage supply chain risks, while maximizing profits. The right plan must not only help companies develop a comprehensive idea of how each part of their supply chain currently links together, but also assess the procedures currently used and determine whether software and systems could be improved. What's more, the plan must be able to use analytical formulas in coming up with methods to mitigate risk and predict potential problems that might occur in the future—thereby allowing companies to create a preventative plan of action.
Maximizing Supply Chain Efficiency
With the right supply chain management solutions, businesses can create a balance between the critical forces of supply and demand, using analysis and data to plan for future needs, and build on current business processes.
In fact, Bain & Company conducted research which suggested that companies with reliable supply chain solutions were capable of achieving 12x the profit margin of companies that rely on poor management methods. With the right supply chain management solution, there is no end to the potential success your business can not only reach, but maintain.
How will you use supply chain management solutions to maximize budgets, develop risk-reducing plans for the future, and enhance your profits?