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High-performance organizational strategies are a hot topic among industry professionals who are looking to radically enhance their capability to deliver goods to consumers. “Supply chain optimization” refers to the processes and strategies that enable the entire supply chain to function at peak efficiency from start to finish. The highest performing organizations know that the supply chain is a key and vital aspect of the strategic advantage that determines cost, profits, and customer service; the supply chain is arguably the entire measure of success within a business, so optimization of it is more than just a passing fad.
So how are the best organizations approaching their supply chain strategies? What are some of the most important methodologies to adopt when strategizing high-performance supply chain organization and optimization? Do you need to partner with a 3PL like Redwood Logistics to achieve the same level of high-performance?
Let's see if we can get to the bottom of these questions...
The biggest mistake low performing organizations make is only implementing supply chain optimization strategies after a significant event has occurred. This defensive method doesn’t work fast enough, and usually, the event itself overrides the supply chain’s inefficiencies. There is no way to optimize when you’re playing catch up.
The highest performing supply chains are those that consistently and regularly optimize their supply chain. They acknowledge and adapt to regular fluctuations to ensure that all partners are always working together to deliver quickly, safely, and with the highest profit margin. Forward-thinking optimization is the best method for growth and risk management strategy because it allows for a flexible supply chain that addresses concerns efficiently (sometimes before they’re even a concern).
Optimizing your supply chain isn’t a project that suddenly “works.” It’s a journey that continuously ebbs and flows. The goal is to create a supply chain strategy that can effectively and efficiently address any fluctuations that arise alongside your business, so you always have the smoothest supply chain process. Supply chains are ever-changing, from changes in material costs to shippers to customer demographics and beyond. You can’t just implement a few procedures and hope the supply chain is optimized for the next few years.
Supply chain optimization is a marathon that takes time to implement and an indefinite plan for continuous updating and growth.
If your optimization strategy is constantly changing in the “marathon,” how do you know if you’re on the right track? How do you know if your supply chain is working effectively? You need to define a clear value standard that quantifies just how well your supply chain is performing.
This means you need to establish key performance indicators and metrics by which you can measure success. Example KPIs might include total operating expenses and gross margin return on inventory invested. You don’t need to follow every metric, just those that help you determine patterns of growth, stagnation, or loss. Choose KPIs that truly matter to the overall supply chain vision and goals, not those that make your business look good or don’t translate consistently to other members of the supply chain.
Once you know what success looks like for your supply chain, you can create strategies, contingencies, processes, and technologies that work towards those objectives.
Start with an analysis of the current state of your supply chain. This will become a baseline for your strategy so you can emphasize areas of strength as well as address areas of weakness or potential failure. The more thorough and honest this evaluation, the better you’ll be able to optimize the supply chain for high performance.
This analysis should look at the finances, inventory levels, margins, supply chain relationships, distribution facilities, technologies, goods movement, and everything in between. Essentially, you want to get a full picture of how each supply chain partner is working in tandem to deliver the product. What do the metrics say, and how can you implement procedures that can improve these metrics?
High-performance organizations think about strategy before activities. That means analyzing what the company’s goals are for inventory, product, transportation, distribution, and service on the whole. This strategy examines organizational structures that need additional investment or boosting, and it ensures the strategy is consistent across all partners in the chain.
Only after the long-term strategy is in place should you consider operational planning. This translates the organization’s objectives into policies, procedures, programs, and day-to-day activities. This part of the planning establishes daily, weekly, and monthly activities that promote your supply chain goals, while also ascertaining where to allocate resources to meet those defined goals.
If we’ve learned anything from 2020, it’s that things don’t always go according to plan. The highest performing organizations during and after the COVID-19 pandemic are those who had prepared for worst-case scenarios in their business and established their response strategies in advance.
Being proactive in your supply chain optimization helps minimize your susceptibility to disruptions, but things will still happen—like severe weather, loss of suppliers, vendor mishaps upstream, labor strikes, or a global pandemic. Also, being proactive about potential uncontrollable scenarios helps you shorten your response time, create a more effective response, and ensure you and your supply chain partners are on the same page.
Learn about the importance of supply chain risk management here.
Studies have shown that the highest-performing supply chains are those that have the consistency of leadership paired with a strong supply chain vision. They also show that supply chains with a single point of contact or leadership are more effective. This means you want to create unified goals with all supply chain partners, who then all report to the same source. This could be an individual acting as the leader of the supply chain, or the primary source could even be a blockchain AI system.
Regardless of how you decide to create this alignment, you want to work to minimize gaps between partners’ functions by creating consistent horizontal processes and visions. The supply chain should function as an organization in its own right, with shared goals and processes that make the entire process smooth and aligned.
Take corporate responsibility as an example. What if one partner has a core value of production sustainability, but one of the supply chain partners is releasing toxic gases into the air during material manufacturing? This would damage the reputation of the sustainability-focused partner while also creating a major breakdown of communication between partners that is sure to lead to performance-damaging disagreement in the future. Alignment is a vital component to supply chain success.
In today’s supply chain, technology is the only way to have the utmost optimization. From transportation management systems to predictive analytics to blockchain, technological uses for the supply chain are hard to beat.
It’s a lot more than just employing the technology, though. You want to leverage the right technological systems, while also ensuring they’re implemented correctly the first time. Not correctly deploying technology to support your business functions is guaranteed to cost you customers, revenue, and resources that can damage your business. One of the biggest mistakes you can make is not creating an effective change management strategy to prepare your team and supply chain partners for new technologies.
It’s like buying an iPhone and then only using it to make phone calls. The technology itself doesn’t do anything unless the user knows how to leverage it effectively towards the organization’s end goals.
Learn how to give your supply chain the technological upper hand here.
There is a lot that goes into supply chain optimization. That’s why most organizations just aren’t doing it well and aren’t performing at their highest capacity. Third-party logistics providers like Redwood Logistics work on supply chain optimization strategies every single day. We have the experience, knowledge, and network to create the most comprehensive and accurate analysis for your business. The best 3PLs have a collaborative nature, constantly building relationships with transport carriers, warehouse providers, and other supply chain partners.
There is no one-size-fits-all when it comes to supply chain optimization. Every supply chain looks and functions differently, so you need a custom solution that will show success with your unique variables. You need a strategy that will establish the most dynamic and responsive supply chain, allowing you to grow your profit margins and enhance your customer service.
Check out Redwood Logistics supply chain consulting services here. We use our consultative approach to analyze your supply chain and design a custom solution for the best means of procurement, networking, processes, alignment, technologies, training, and more for your unique business needs.
See for yourself why our clients choose to work with our experienced Redwood Logistics team to keep their supply chains optimized, growing, and profitable.