Supply chains are multifaceted and can be a noteworthy source of competitive advantage. To improve supply chain management efficiency and effectiveness, companies have to improve predictability, optimize costs, minimize working capital, mitigate risk, and analyze data.
Companies who strategically improve even one area of the supply chain create a ripple effect of operational advantages. A resourceful, successful supply chain helps businesses save money – from faster delivery time, shorter factory processing time, better inventory management.
What is supply chain efficiency?
Supply chain efficiency is an organization’s core standard of performance. Efficiency measures the ratio of work performed in a process and whether the process is using the best practices and making the most of available resources. Therefore, supply chain efficiency doesn’t always guarantee effectiveness. A supply chain might efficiently lessen costs, but if the end consumer is unhappy with the product, it’s ineffective. So, an effective supply chain focuses on the outcome and external standards.
Well-built supply chains improve margins, support expansion, drive positive consumer experiences, and reduce operating costs. Determining the best way to move a product to its destination takes consideration of optimizing order processing, receiving procedures, outbound schedules, and reverse logistics.
The role of distribution networks in supply chain efficiency
A distribution network is a system a company uses to get products from the manufacturer to the retailer. Companies who leverage the supply chain as a strategic capability have built a durable distribution network. A fast, reliable network is a competitive advantage because customers are able to get products whenever they want them.
Today, the trend is for distribution centers to be located close to major markets in order to reduce inbound and outbound miles. “The ability to get a product to market in 1-2 days when your competition can only deliver in 3-5 days is a serious weapon,” says Wulfraat, President of MWPVL International.
How to improve supply chain management efficiency?
For an efficient supply chain, companies create reliable transportation solutions. A transportation network empowers a company to reduce shipment costs and increase service levels with little disruption to any processes. Also, an effective transportation network starts with shipment visibility. Visibility improves routing, capacity, and profitability.
Shippers work with 3PLs to explore new transportation solutions. Also, organizations have to impress customers and innovate processes. 75% of 3PL users say 3PLs provide new and innovative ways to improve logistics effectiveness. The most frequently outsourced logistics activity is domestic transportation (80%). Regardless of mode or freight volume, 3PLs can assess and tailor solutions to a company’s needs.
Through a 3PL, companies can gather transportation and logistics information to forecast accurate needs, influence supply chain decisions and can ultimately grow process efficiency and customer service.
So, shippers need to first analyze the existing supply chain processes, distribution network, and transportation solutions to find pain points and opportunities. Looking at current and predicted delivery lead-times, logistics expenses, and inventory assets are good data points to find a path to efficiency and effectiveness.
Partnering with a 3PL adds value and efficiency to an organization’s supply chain. The technology and resources that third-party logistics companies provide create flexibility, contain or reduce costs, increase space, enhance visibility, and most importantly, enables the organization to focus on their products and customers.
Related PLS Logistics Posts: