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7 SCM Best Practices You Should Know About

October 6, 2023 - Emily Newton

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Supply chain management involves the creation of products/services, material handling, supply chain planning, logistics, order management and fulfillment. With companies effectively managing the supply chain, they can reduce their costs while delivering products to consumers faster.

However, there are many factors that companies could face that make it challenging to complete operations effectively. Here are seven SCM best practices businesses can use to streamline their efforts.

1. Establish and Monitor KPIs

One of the most beneficial SCM best practices is to set up key performance indicators (KPIs) and regularly monitor them. Supply chain managers can establish specific metrics that will allow them to improve the company’s operational efficiency.

By tracking these factors, organizations can ensure they take the necessary actions to help reach company objectives. Monitoring KPIs can also aid in improving customer satisfaction and consumer retention rates.

Here are a few metrics supply chain managers can monitor and manage to increase the effectiveness of the supply chain:

  • Warehouse Costs: This metric involves all costs associated with warehouse operations. These could include rent, equipment, staff labor, software applications and many more. Businesses should monitor these costs and regularly see what areas they can actively reduce.

  • Inventory timeframe: With managers tracking this metric, they can get a good indication of when they need to restock. It involves calculating the amount of stock a company intends to sell in a given time frame.

  • Error-free order rates: The amount of successful orders clients receive that do not contain any problems. It is one of the most important metrics companies should pay attention to because it is directly related to building a strong consumer relationship.

  • Cycle time: Cycle time is an essential metric businesses should track. A shorter cycle period means the supply chain is running more effectively, whereas if it is longer, it can indicate potential problems.

  • Sales ratio: With companies tracking this metric, they can effectively order closer to the right amount of goods the business will need. In other words, it stops them from accidentally overstocking or understocking. They can calculate the sales ratio by dividing the amount of inventory the company has on hand by the amount they have sold and then multiplying the total by 100.

2. Use Total Cost of Ownership to Drive Decisions

Companies should consider using their total cost of ownership (TCO) to help guide business decisions. TCO refers to all the associated costs of the entire supply chain. It includes storage, acquisition, selling the products and transporting the goods.

With companies prioritizing the TCO, they can make informed decisions that push the business forward. The organization would need to look at all the scenario factors to help them determine whether the outcome would result in a lower TCO.

For example, a supplier might offer a company a lower price if they order stock in bulk. While this might look like a good option, it requires further analysis.

If the business discovers they do not have the required storage space for this bulk order, it could result in additional unforeseen costs. Thus, it might benefit the organization more to consider other options.

3. Rely on Multiple Suppliers

There are many different factors that could arise and disrupt a supply chain. Planning for all these delays is a challenging task. Instead, the company could focus on building a partnership with multiple suppliers.

If something goes wrong, the company still has a partner from whom they can source the product. This reduces delays and helps the business maintain a good relationship with its consumer base.

Relying on multiple suppliers is a great SCM best practice many companies should adopt. It allows an organization to keep up with customer demand despite unforeseen events.

4. Developing a Team of Supply Chain Professionals

Many company’s supply chains are feeling the pressure of the staffing crisis. Unfortunately, the world is experiencing a labor shortage, which causes several challenges for organizations. While technology has advanced to the point where it can perform some supply chain tasks, it still requires people to ensure everything runs smoothly.

Building a team of supply chain professionals is more challenging than it once was. For this reason, companies should explore different routes for sourcing talent. For example, many businesses have chosen to build strong relationships with universities.

This allows the company access to a talent pool of skilled supply chain workers. They can provide students with internships and entry-level jobs that prepare them for a role in the field. This is an effective way of acquiring talent.

In addition, supplying staff with additional career development opportunities will also help to increase retention rates.

With the company investing in different learning opportunities, its staff can become more well-versed in their abilities. This helps them to deal with various supply chain operation tasks effectively.

5. Saving Time With Automation

Many companies can benefit from Incorporating automation tools in their operations. It can help save time and increase overall efficiency. One aspect that can see significant improvement from this technology is the order-to-pay process.

This process involves all the stages in an order. For most companies, this procedure requires the help of different departments. If these departments don’t use the same shared system for their operations, it can cause some issues.

Companies can remedy this problem if they use a single platform that automates all the steps involved in the order-to-pay process. This can help reduce discrepancies and save time while increasing operational efficiency. It is a SCM best practices organizations should consider.

6. Improve Planning for Future and Current Demand

Businesses should focus on improving their planning for customer demand. Purchasing too much or too little stock can create many setbacks for companies, often resulting in expensive actions needed to rectify the situation.

Organizations should look at different factors when calculating the amount of stock they require to meet customer demand. This includes the time of year, promotions, previous sales and sales forecast.

With businesses improving their planning, they can ensure they are well-equipped to meet the needs of their customers.

7. Make Risk Mitigation a Priority

Prioritizing risk mitigation is a SCM best practice that can significantly benefit a company. It involves identifying different problematic situations and looking at the likelihood of them occurring. This allows the company to effectively put measures in place that can reduce the impact of these events.

For organizations to achieve this, they need to stay current on legal legislation and laws. This can help them reduce delays that transpire from these risks and increase business performance.

Relying on SCM Best Practices to Increase Operational Efficiency

Many factors can disrupt the effectiveness of a company’s supply chain. With businesses prioritizing SCM best practices, such as monitoring KPIs, they can reduce the likelihood of the supply chain suffering delays. Effective supply chain management requires constant refining of operations to ensure optimal efficiency.

Revolutionized is reader-supported. When you buy through links on our site, we may earn an affiliate commision. Learn more here.


Emily Newton

Emily Newton is a technology and industrial journalist and the Editor in Chief of Revolutionized. She manages the sites publishing schedule, SEO optimization and content strategy. Emily enjoys writing and researching articles about how technology is changing every industry. When she isn't working, Emily enjoys playing video games or curling up with a good book.

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