Efficient management of the supply chain is crucial to ensure the viability and prosperity of any type of business. In a saturated and competitive marketplace, differentiation lies in the product or service delivery experience.
The supply chain is an essential foundation for organizational processes, ensuring that products and services flow consistently and efficiently from the source to the end consumer.
It encompasses several phases, from planning and procurement of raw materials to distribution, involving suppliers, manufacturers, distributors and even retailers.
In this article, we will learn all about the supply chain of companies that supply products, its elements and keys for optimal management, as well as the demands of a globalized world that demands to capitalize on the technologies it offers.
Before understanding the elements necessary to optimize the supply chain, it is vital to define the business strategy and the level of service offered to the customer.
Service levels include various points including lead times, inventory replenishment, frequency and routing of shipments, to delivery quality levels.
Although achieving 100% effectiveness is feasible, it is important to strike a healthy balance with the associated costs. This is where the supply chain plays a crucial role, impacting the company's revenues, costs and expenses.
In the end, the way these three elements are handled will be what defines how profitable a business can become.
Although the supply chain is commonly conceptualized as a unidirectional flow of products from manufacturer to consumer, it is actually an intricate system of interconnected components that work together to facilitate this process.
Each element has a specific role and is vital to ensure the efficiency and effectiveness of the total package. Let's see what these elements are and what their role is in the chain:
Depending on the size of the company, the supply chain must be in coordination with several areas of the company to receive information and be able to provide the level of service established in the organization's strategy.
Among the main areas are:
Each of these areas must provide information inputs so that the supply chain is efficient and a Logistics Master Plan can be created.
|
Areas |
Annual Input |
Recurring Input (Weekly or Monthly) |
|
Procurement |
APOP (Annual Procurement Operations Plan) |
Purchasing Status |
|
Commercial |
Commercial Budget or Demand Plan |
Commercial Forecast |
|
Customer Service (if any) |
Customer Status |
|
|
Production |
Annual Production Plan |
Recurring Production Plan |
|
Maintenance |
Annual Maintenance Plan |
Recurrent Maintenance Plan |
|
Logistics |
Logistics Master Plan |
Delivery Status |
The information provided must be consolidated in a process established with a specific methodology within its S&OP (Sales and Operations Planning).
This process allows all areas to supply their information in order to deliver the level of service established in the company's strategy.
The characteristics that define an efficient and robust supply chain are diverse and multifaceted, involving technological, organizational and strategic aspects.
As demonstrated above, the supply chain has evolved far beyond being a simple operational mechanism; it has become a strategic component that can determine the success or failure of a company in the market.
Among the advantages of having an effective supply chain, we can highlight the following:
Seeking customer satisfaction ensures that products arrive on time and in the right way, increasing satisfaction and loyalty levels, and therefore, positively impacting the company's reputation and positioning in the market.
Enables businesses to reduce costs in various areas, such as inventory, warehousing, and distribution, by implementing strategies that optimize operations through technology and process integration.
Superior ability to respond to market demands can be observed, providing organizations with a key competitive advantage over competitors that do not have such refined supply chain management.
The ability to adapt and recover quickly in the face of unforeseen events or crises is vital to an organization's sustainability, a robust supply chain is necessary to navigate through challenges and maintain operability even in times of adversity.
By maintaining a supply chain that embraces technology and innovation, companies place themselves in a favorable position to explore and adopt new strategies, products and markets, fostering a cycle of continuous improvement and innovation.
Finally, a supply chain that enables the efficient expansion of a business is not enough, it has to be a complete and comprehensive chain, such as the 4.0, which can be an essential differentiator for success.
Once the process is established correctly and there is a solid base to manage a certain level of service, it is time to increase it with the tools that give us a path to the differentiation we are looking for without increasing the cost proportionally.
The supply chain 4.0 offered by London Consulting Group has the characteristic of integrating and adopting several advanced technologies that transform supply chain management.
Some key examples for this transformation are detailed below:
This technology allows us to have a very secure traceability of the elements that flow through our supply chain. In addition, it provides automation through smart contracts, which in turn provides us with security in the data being handled.
At a time when security is everything, this type of competitive advantage is a great point in favor of this efficiency within the operations of a business.
Likewise, supply chain 4.0 provides us with sensors and/or devices that allow us to maintain accurate real-time traceability of supplies, facilitating data-driven decision-making.
With certain machine learning algorithms, we analyze historical data to improve demand accuracy.
This allows us to plan, distribute and manage inventories throughout the chain efficiently and comprehensively.
Hand in hand with the use of artificial intelligence is big data, where algorithms can be created to predict future events based on the historical behaviors of our data.
RPAs is the technology that allows us to implement automation in inventory management, picking and packaging of products.
In addition, it is possible to automate internal movements by finding hot and cold zones to increase efficiency within the warehouse.
There are many business intelligence platforms that allow us to visualize required information in real time.
It is important that these KPIs are built in such a way that the drill down can be performed to understand why there is a failure in the process or why there is success within the process.
This is why KPIs have to be built from the operational side with a strong strategy behind them to reach the required success.
While we have explored the importance of a supply chain and its fundamental characteristics, it is imperative to pause to consider the tangible and intangible benefits that effective supply chain management can bring to a company.
Optimized and expertly managed incorporation, such as that which London Consulting Group offers, can result in a number of competitive and operational advantages that translate into success and sustainable growth.
Effective management allows companies to reduce costs associated with inventory levels and the financial cost associated with it, as well as a significant reduction in purchasing costs by incorporating negotiation techniques with suppliers, and capital recovery by managing obsolete inventory.
Also, one of the most striking benefits is that there is a minimum of lost sales due to out-of-stock, in addition to the reduction of production costs due to stoppages attributed to lack of raw material stock.
Finally, we have a notable increase in efficiency in the storage and distribution area, and many more points that contribute to the improvement of the company's overall profitability.
Obviously, the qualitative benefit focuses more on non-monetary points in the short term, but in the long term it has positive consequences for the permanence and growth of companies.
By ensuring on-time deliveries and avoiding out-of-stock, businesses improve customer experience and satisfaction with respect to established service levels, which can result in increased customer loyalty.
In addition, a reliable and efficient supply chain reinforces brand reputation, positioning itself as reliable and professional in the minds of consumers and business partners.
Last but not least, it also provides flexibility to enable organizations to adapt quickly to changes in the market, such as fluctuations in demand or disruptions in supply, while maintaining uninterrupted operations.
London Consulting Group has an established methodology that begins with an assessment of all the areas of opportunity that exist in your supply chain, followed by the design and implementation of the solutions to those areas of opportunity and finally performing audits focused on the implemented solutions up to 12 months after the completion of the implementation.
London Consulting Group also employs Design Thinking techniques to redesign processes in conjunction with the client and Scrum techniques to constantly monitor progress and provide results in the short and medium term with its financial evaluation method, and in the long term with its audit reviews.
With London Consulting Group, optimizing your supply chain is within your reach, offering comprehensive solutions that adjust and scale according to the specific needs of your business.
We are not simply a solutions provider; we are a strategic ally that accompanies your business at every stage of its growth, ensuring that your supply chain is an enabler, not an obstacle, to achieve your business and organizational goals.