Efficient supply chain management is a critical element of any business, and companies must implement the right supply chain strategy to improve their operational efficiency. The current fluctuating global business environment necessitates an agile, efficient, and resilient supply chain, and businesses need greater end-to-end supply chain visibility that can provide actionable insights.
What is Supply Chain Efficiency?
Supply chain efficiency means maximizing the existing resources to deliver a product to the end-user without delay and increasing costs. Supply chain management solutions ensure efficiency in processes, enhance product quality, mitigate risks or disruptions and drive business growth.
Example of Supply Chain Efficiency
An oil and gas company reduced its stock wastage and achieved substantial cost savings by adopting intelligent supply chain software. It partnered with GEP to get real-time visibility updates and easy-to-interpret visual data on its inventory and warehousing through simple and intuitive dashboards.
Result: GEP NEXXE enhanced the efficiency of the company’s supply chain operations by streamlining the inventory and warehouse management processes, reducing redundancy by 40%, and minimizing the liabilities by 12%.
Improving Supply Chain Efficiency with Best Practices
Here are a few best practices to improve supply chain efficiency:
- Adopt automation to data in real-time
- Increase end-to-end visibility
- Enhance forecasting accuracy
- Measure and optimize inventory levels
- Ensure route optimization
- Increase collaboration with all stakeholders
Improve Supply Chain Visibility
Supply chain visibility aims to improve overall performance by ensuring that products are delivered on time and per quality standards.
Improving supply chain visibility lowers manufacturing costs by improving the efficiency of your production processes. It also reduces inventory levels and warehousing costs, resulting in increased profits.
Automate Supply Chain Processes
Automating supply chain processes allows the business to scale and lower costs while enhancing customer experience. It can be applied to:
- Inventory management
- Selection of suppliers & their onboarding
- Selection of facilities in terms of location
- Route optimization
- Forecasting demand
- Foreseeing disruptions and recommendations for mitigating them
Regularly Optimize Supply Chain
- Track the supply chain to ensure it is working optimally
- Ensure end-to-end visibility of supply chain
- Optimize the supply chain data flow
- Track inventory in real-time
- Review supplier performance
- Encourage innovation
Supply Chain Efficiency Performance Metrics
Supply chain efficiency metrics are used to measure supply chain performance and identify areas that need improvement. For example:
- Supply Chain Inventory Turns – It measures how quickly inventory turns over within a system or company compared to industry standards. A low number means less waiting time for deliveries or orders being fulfilled by suppliers.
- Supplier Performance Index (SPI) – This metric measures supplier performance based on six areas: lead time, quality, cost, delivery, reliability, service level agreements (SLAs), and customer satisfaction. The SPI combines all six factors into one score that helps determine how well each supplier performs overall across your entire organization’s operations and against competitors’ businesses within their respective industries.
- Throughput – The number of goods that move through a system or process within a given period (e.g., hours, days, week, month and year).
- Efficiency – A measure used to determine whether all inputs associated with a given operation have been used as intended; includes wasted effort and non-value-add activities.
Time
One of the critical metrics that businesses consider for evaluating supply chain performance is related to time. For example, companies assess on-time deliveries and receipts, the time required to process orders, and fulfilment.
Cost
Reducing costs across its value chain is an essential strategy for any business to improve efficiency and enhance its profits. However, companies must also be aware that lowering costs in one process could affect an increase elsewhere.
Quality
Performance metrics focused on improving the quality of products, their packaging, and customer-friendly returns are crucial for a memorable customer experience, competitive advantage and growth.
Evaluating Supply Chain Efficiency in Real-Time
Businesses must assess their sustainable supply chain efficiency metrics in real-time since the wastes are also generated in real-time: greenhouse gas emissions, scrap, redundancy, and the like. By adopting innovative software, businesses can access real-time economic and environmental data to improve efficiency and reduce waste, sustainably lowering costs and enhancing profits.
Conclusion
Today’s businesses must develop an efficient and streamlined supply chain management model that can unlock innovative and effective ways to control costs and manage the disruptions of a constantly changing environment.
Frequently Asked Questions
How do you measure supply chain efficiency?
Supply chain efficiency metrics are used to measure supply chain performance. These include supply chain inventory turns, Supplier Performance Index (SPI), throughput, efficiency, and material quality index.
How can automation streamline supply chain strategy?
Automation is one of the best strategies to increase supply chain efficiency. It allows the business to scale and lower costs while enhancing customer experience.
How do you calculate supply chain efficiency?
Supply chain efficiency metrics are used for calculating supply chain efficiency because it allows the business to see how well it performs, which can help identify areas that need improvement.
Why do businesses need an agile and resilient supply chain?
An agile and resilient supply chain provides actionable insights through end-to-end visibility, ensuring rapid response to challenges and lowering costs across the extended chain.
