More Best Practices in Supply Chain Management

Each supply chain organization has its own success strategy. But, these organizations also share a few best practices that you too should adopt if you want to become successful. They include;

• Establish key supplier alliances

Supply chain managers must realize that “beating” suppliers on prices is a profoundly limiting strategy. It creates a situation where you might win yes, but the supplier might get the feeling that they’ve lost. This creates a lot of problems and has broken many supplier relationships. What you should be aiming for instead is a win-win strategy where each party feels that their best interests are being taken care of.

• Focus on TCO – not price

Multiple studies now show that acquisition cost is usually just 25 to 40 percent of total cost for most products and services. The remaining cost is hidden in warehousing, maintenance, training, quality management, and transportation among others. So, rather than dwell on acquisition cost, start working with total cost of ownership (TCO) by taking into account all processes involved from procuring to consumption.

• Optimize your organization’s inventory

More organizations are looking for ways to reduce their working capital. Keeping inventory quantities at optimal levels can help with this. Far from what most people think, the “real” cost of holding inventory is very high. Recent studies show that inventory holding could represent up to 60 percent of the cost of an item if that material is held in the warehouse for 12 months or more. Shortening this “holding” period can therefore save you a lot of money.

• Establish control measures and minimize risk

The first step here is to establish organization-wide policies and procedures to guide behavior and deter theft, fraud and other problems. But even more importantly, best in class organizations review their policies frequently to keep them realistic and up to date. Risk mitigation is just as important and should be integrated into sourcing decisions at all times.

• Correctly staff the supply chain for maximum productivity

A majority of supply chain organizations are served by either a decentralized or centralized structure. Others have also found a way to mix the two. Whichever option you choose, keep in mind that your organizational structure will play a key role in your success. You want leaders moving to management positions to acquire proper education as they move through the system.

Summary

Evaluate your organization today and start implementing these best practices.

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