Every business with an efficient supply planning system will always enjoy a competitive advantage. Having a functional and practical system will help you cut down the risks of buying raw materials and selling your services and products. But what are the benefits of an efficient supply chain?
What is supply chain planning?
This refers to the ability of a company to forecast future demands correctly. Such planning demands that companies can balance demand and supply while managing their assets in such a way as to optimize goods and service delivery. Supply chain planning help ensure there is tactical and strategic planning support to help address distribution, supply, manufacturing and forecasting issues.
Being able to incorporate innovative product strategies, supply chains, and integrated logistics makes it possible for you to forecast demand. A proper supply chain plan makes it possible to adapt to the ever-changing conditions businesses face.
Lower operational cost
Another outstanding benefit of an efficient supply chain planning system is that it helps cut costs. Lower costs are achieved by optimizing storage space for completed goods and removing damaged goods. Most retailers rely on supply chains to deliver expensive products without having to incur the cost of holding inventories in a warehouse for extended periods.
Better financial position
One unique thing about value supply chain managers is that they assist in cutting down supply chain costs. Another thing about this is that it helps cut down fixed assets such as warehouses, plants and transportation vehicles. Also, an effective system should help accelerate product flows which means more products will be delivered under less time thus increasing sales performances.
When organizations incorporate demand forecasting into their supply chain planning, they put themselves in a position to handle the increase in demand. Doing this helps cut down the possibility of running out of stock while helping the company meet customer demands. Consistently meeting the demands of customers helps ensure greater trust and loyalty from them.
Improved shipping options
With an increase in the number of ecommerce companies out there, buyers now have many options to choose from. This makes it important for companies to operate an efficient shipping plan to meet the ever-increasing demands.
Improved quality control
Quality control issues follow the rule of 10, explains Arshad Hafeez, Global Expert for Supply Chain Management and Quality Control, SCM-Group Function (GF) in an article for CIO Review. According to the rule of 10, the cost to replace or repair an item increases by tenfold at each step of the progression, resulting in significant costs for companies when quality issues arise.
Companies that have greater control over not only their direct suppliers but also their suppliers’ suppliers benefit from improved quality control. Implementing standard minimum quality criteria, for instance, enables direct suppliers to identify and partner with secondary suppliers that meet those requirements. Likewise, process guidelines can help suppliers comply with your company’s quality requirements. Some companies go beyond simply providing criteria, conducting periodic audits or requesting documentation verifying suppliers’ compliance steps. Hafeez recommends implementing a Management Operating System (MOS) for monitoring key performance indicators including:
- On-time delivery
- Scrap rates, reworks and similar issues at suppliers
- Final product quality (as received by end customers)
- Time for complaint resolution
- Findings from supplier quality assessments
By analyzing performance data, companies can partner with the highest-performing vendors and suppliers to maintain strict quality control.
Achieving optimal supply chain planning is not the easiest process out there, but it is vital for any business to thrive. The benefits of supply planning like the ones outlined in this piece are pointers to why you should invest heavily in it.