6 Supply Chain Optimization Best Practices Your Business Should Be Following

Today’s tight economic times highlight the unmistakable value of supply chain optimization. When you effectively perform supply chain optimization, you can improve communication, increase access to information, reduce costs, enhance everyone’s sense of control, streamline points of contact, and more. 

However, supply chain optimization is often easier said than done. To that extent, most businesses may not know where to start. Fortunately, the experts at Trans Audit have created a helpful guide to supply chain optimization best practices. Continue reading and learn a few key steps you can take to optimize your supply chain and realize the bottom-line-changing benefits. 

Create a Governing Supply Chain Council

The purpose of a supply chain council is to provide direction and help align supply chain strategy with the organization’s overall strategy. The members of the council should include business unit managers, executives, the leader of the supply chain business, and other important organization leaders. 

The council should meet regularly to create a clear strategy for functionality and efficiency. Failure to create a supply chain council increases the likelihood the organization’s overall strategy isn’t aligned with the supply chain. 

For example, if your goal is to turn inventory over every six months, your supply chain should not take in raw materials that would knowingly take a year to consume. By staffing your supply chain council with lower-level management and executive management, you can bolster cross-functional communication and demonstrate the critical value of an organized supply chain. 

Consider Using a Centralized Management Software

The process of supply chain optimization involves the seamless communication and functioning of various business units working together. There are a vast range of different supply chain optimization software available to help facilitate the integration of different business departments. 

For instance, the software may help your finance, inventory, and sales systems communicate and work together. The software can help ensure important data is readily available in a centralized database that all other systems will have access to, which can streamline business processes. 

Look at the Big Picture with TCO

Many of the top Fortune 500 firms who have mastered supply chain optimization have moved away from selecting suppliers solely on price. While the price is always a critical component, these best-in-class companies look at the big picture or Total Cost of Ownership/Consumption (TCO) for any specific service or product. 

It’s important to understand that the cost of acquisition for the majority of services and products only represents 25 to 40% of the TCO. And the remaining TCO can be attributed to transportation costs, warehousing, and operating costs. However, to use an accurate TCO estimate, your procurement teams will need to be more collaborative with suppliers.

Strategically Collaborate with Suppliers for Supply Chain Optimization

At the heart of any optimized supply chain is the strategic selection of suppliers. Adding a collaborative element to your strategic sources can drive even better results. According to an Industry Week article citing the University of Tennessee’s J. Paul Dittman, the most successful supply chains efficiently execute five key pillars:

  1. Talent
  2. Internal Collaboration
  3. Technology
  4. External Collaboration
  5. Change Management

As you can see, collaboration is at the core. Work to move your sourcing past the purchasing department to engage suppliers in the decision-making process. You can ask for feedback on all business functions or areas that can play a role in the success of your processes or initiatives. By mastering collaborative sourcing, you can improve responsiveness, reduce costs, and streamline operations. 

Reduce Costs through Optimized Inventory

No matter your sector, the desire to improve the bottom line by reducing inventory costs almost always exists. And this especially true amid the coronavirus pandemic with the global economic downturn. In support of these efforts and in light of the times, supply chain management should feature a repeated examination of optimizing inventory quantities. 

Simply put, there is a real cost of storing and holding inventory, and —unfortunately — it’s almost always more than the standard 20% to 25% assumption. In fact, Supply Chain Quarterly reported that holding inventory could represent a sobering 60% of the cost of a product kept in inventory for a year. It’s best to optimize your supply chain inventory through demand planning and forecasting. 

Recurring Audit of Freight and Parcel

When it comes to your supply chain, one sentiment rings loudly true: you can’t fix what you don’t measure and monitor. To help you gain valuable insight into your supply chain and identify opportunities for improvement, it’s imperative to have ongoing monitoring of your freight and parcel expenditures. 

However, most businesses lack the time, experts and know-how to conduct an audit, which is why corporations of all sizes and geographies turn to Trans Audit for Global Transportation Post Audit Services. Trans Audit’s comprehensive freight auditing process identifies billing and payment errors and actively works to recover lost funds. Trans Audit also analyzes error patterns to best help you prevent future issues and eliminate recurring errors. 

Contact Trans Audit For Global Freight & Parcel Post Audit 

At Trans Audit, our mission is clear: we deliver exceptional ROI, global cost reduction, and low-risk services in the form of refunds, future expense reductions, and enhanced compliance and control. To achieve this goal, we use proprietary state-of-the-art platforms and highly-skilled transportation professionals that make implementation and ongoing management swift, straightforward, and simple. 

If you would like to learn more about how Trans Audit’s Global Transportation Post Audit Services can help generate savings, efficiencies, and recoveries in your supply chain, do not hesitate to reach out to the team at Trans Audit.

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