In an increasingly customer-centric economy, differentiating your business in a crowded marketplace is no simple feat. To gain a competitive advantage, businesses have traditionally looked to gain market share by either, offering a basic product at the lowest price or by differentiation – creating a product which is unique and desirable (Porter,1985). Because of this, often overlooked or not even considered is the positive results that a well-managed supply chain management system can bestow – especially to those with global operations.
Initially, it may not be clear how creating a connected supply chain can gain you a competitive advantage. However, the supply chain is vital to enhancing cash flow. True inventory visibility is the lifeblood to the overall health of any organization that produces for public consumption. To achieve this the customer purchasing cycle needs to be connected with various business areas in sync; including sales, production, warehousing and distribution. The end goal is to give a complete finished product to the customer when required and each business area must understand its function and execute when required.
What should you be looking to improve?
There are many factors which influence the overall success or failure of an organization’s supply chain:
- Inventory Control: Every organization needs some way to control their inventory, and these can change depending on business requirements. For example, cycle-counts, use-by dates and FIFO (First In, First Out) maybe some of the methods used to manage inventory. However, they are only part of the ‘big picture.’ You also need a detailed understanding of inventory visibility, where and how the inventory resides - this could be inside or outside the four walls of the warehouse. Accurate real-time data is also key; relying on 24,48 or 72-hour snapshots will only give you a glimpse of your inventory and won’t allow decision-makers to act accordingly. That could potentially lead to making adverse decisions.
- Demand Forecasting: Understanding your market is crucial for achieving supply chain success. Being able to accurately forecast the amount of stock needed will not only improve your cash flow and reduce potential stock write-offs but also boost profitability by keeping your cash in the bank, not in the warehouse.
- Logistics: The supply chain doesn’t just end when the inventory rolls of the production line and into the warehouse. Tracking inventory from the point it leaves the warehouse, all the way through to the end destination, allows you to build a far deeper understanding of the customer buying cycle and can improve customer satisfaction levels by giving detailed information.
- IT Systems/Software: Technology is constantly evolving, cloud-based. Mixed multi-ERP and offline system functionality are becoming the norm as organizations look to create a connected system.
- Commitment: When implementing any form of business change, you need full commitment from everyone involved to have the best user adoption rate. There also needs to be a clear answer to several key questions: Why the business is doing this? Is the aim to increase picking speeds? To gain real-time inventory visibility? To have a connected offline system? Whatever it is, changing for the sake of change can potentially harm your business, so it needs to be well thought through and have full commitment.
Differentiation is in front of you
With many organizations ultimately overlooking the importance of their supply chain, by bringing it to the boardroom table, you can use it as your differentiator. In a crowded marketplace, innovating to a more customer-centric supply chain can have many positive results, from an increase in sales and greater market share to reduced costs and better cash flow. By conducting a supply chain assessment you can establish how you can make improvements and gain a competitive advantage.
* Porter, M. and Porter, M., 1985. Competitive Advantage. New York: Free Press.