Supply Chain Efficiency

The past 18 months has proven that the unthinkable really can happen, and the whole world has had to deal with previously unseen levels of disruption without any real guidelines. The pandemic has demonstrated how seriously production is affected when supplies aren’t available, travel is restricted, and when less (or no) workers are allowed on the floor, among many other difficulties.

While we may not be able to predict the next global pandemic, improving the efficiency of manufacturing, procurement activities and stock management will provide a significant level of resilience against potential future disruption.

During "normal" conditions, many supply chains likely operate with inefficiencies that aren’t even noticeable, but as soon as disruption strikes, they are difficult to fix quickly. This is why a thorough risk assessment and evaluation of efficiency should be regular practice for supply chains.

Efficiency doesn’t just concern operational and manufacturing processes; it also requires you to think of your procurement activities and stock management through a lens of efficiency.

Inefficient businesses, especially manufacturers, have a huge carbon footprint. With the Paris Agreement in place and governments all over the world targeting net zero, new environmental goals can’t be met without change to the activities of supply chains across all industries in terms of manufacturing and logistics.

While the future will likely bring specific regulations or procedural changes that will affect the way supply chains do business, ensuring efficiency now will mean that such changes will probably require less of an overhaul. Reducing waste and grouping deliveries are just a couple of ways in which supply chains can be both more efficient and more environmentally friendly.

Even in times of slow trade, you still have bills and wages to pay, and this requires a steady cash flow. One way in which many supply chains are not efficient is through storing excess stock. While it may seem practical to have a healthy backup of components in case of supply issues, excess stock just sitting in storage is impeding your cash flow. Storing excess components will increase your warehouse costs and unused components could even become obsolete during storage, meaning you will be looking at a financial loss.

One of the central principles of efficiency is reducing waste. Wasteful use of materials, resources and labor are all inefficient processes that directly result in higher costs to your business. If your production processes are more efficient, then you will waste less materials, only order the parts you need, and use your labor more effectively.

In order to be less wasteful, you must ruthlessly evaluate your processes, carry out risk assessments and plan comprehensively. Making your production processes more effective may mean additional investment in new technology or employees, but the long-term gains will far outweigh the initial cost.

Supply chain efficiency encompasses more than just your production processes. Rather, it is a mindset with which all activities need to be approached. If you can improve your efficiency, you can expect long-term reduced costs, resilience against unforeseen disruption and a supply chain that is kinder to the environment.

Source: https://epsnews.com/2021/08/30/the-importance-of-supply-chain-efficiency/