How to Increase Operational Efficiency in Supply Chain

From small logistic companies that own a few trucks to giants that own all (air, sea, and land) means of transportation; collective focus is on reducing their logistics cost in order to increase profit margin. There is a simple solution to achieve logistics efficiency and effectiveness and that is "Process Improvement". This process can be broken down to the following steps,

· Analyze logistics for potential problems

· Make notes for process improvement and incorporate corrective measures.

· Implement & monitor continuously for improvement.

Companies engaged in any business need to keep the “Learning Cycle” going in order to improve their prevailing processes, introduce newer efficient & effective means through research, and save from potential risks and associated costs thereby.

Appoint responsibility to the logistics officer to record a short (3 to 4 minute) survey every time a customer is delivered products for ratings on broad parameters such as speed of consignment delivery, safety measures, and customer service. In case of unsatisfied customer or constructive input from any individual, special notes must be made for presentation to reporting officer.

Vehicle Life cycle position, Maintenance, Time, Distance covered for projects, route deviations (if any), & fuel consumption stats must be maintained electronically by an outsourced/ internal team in order to monitor vehicle efficiency and logistics performance. In case of discrepancy with meeting of objectives of logistics-7 R’s, corrective measures can accordingly be taken whether it involves vehicle maintenance/ up-gradation, revision in route planning, or merely employee counselling.

Information gathered by stakeholders is of high value as it enables a supply chain manager to bring the logistics cost down. Sometimes it takes as little as a group activity to understand small problems that can be catered by immediate or middle management therefore bringing up employee morale. Rest of the times it requires studying the costs associated and directly incurred by various vehicles in order to identify and place in category for observation, maintenance, and replacement. This is however, a continuous process and involves monitoring and identification of room for improvements on regular basis. And in order to reduce this monitoring cost to organizations, it is highly recommended that these be contracted & outsourced to companies that install tracking systems, to also maintain data and provide reports on defined time basis. Such information can be used by supply chain officers to decide and conclude improvements in the current logistics strategy and think & plan ahead.

Benefits of using this monitoring service are only a few at individual level but when you are thinking in terms of whole fleet and numerous assets a company owns, this has potential possibilities for reducing costs for the business. It is not only limited to reducing theft risks but also to fuel efficiency monitoring and securing faster delivery of goods in a more appropriate manner as installation of such systems incorporates a thought of continuous monitoring. This has numerous applications and can be used on different valuable assets as well.

A recommendation for such a service is “Monarch Track” that is a sister concern to a trending MNC “Monarch Tracking” which is a “GPS tracking” manufacturer providing Internet-based access to LIVE vehicle tracking and asset management. Link to website is http://www.monarchtrack.com/.

Operational Efficiency in Supply Chain:

Given the unpredictability of demand & frequent technological shifts accompanied by shrinking availability of funds in the telecom sector, “Operational Efficiency” in the supply chain department has become a must for companies that wish to survive and prosper in this day and age.

“Supply chain” today is confronted with many challenges that directly impact operational efficiency. These include the following

· Building long-term supplier partnerships (SRM)

· Stake Holder Engagement

· Effectively monitoring of procurement processes

· Incorporating sustainability and corporate social responsibility.

Supplier Relationship Management (SRM):

“SRM” proposes application of systematic approach that entails classification of goods/ items i.e. plotting of procurement portfolio on the supply-procurement matrix.

Further to classification of procurement portfolio products, Identification of key suppliers should be undertaken for each quadrant and supply chain professionals be engaged in developing and managing partnerships with each category supplier, based on the nature of for each and risk of running into stock outs. SRM focuses on “Joint Value Creation” by emphasizing on the importance of strategic alliances between organization and key supplier in their vendor base. This relationship is based on trust and open communication. Such partnerships are far beyond mere price negotiations and reaching agreement on commercial terms.

The Benefits of SRM

Benefits of incorporating successful SRM are many. Few of these are as below,

· Increased responsiveness to emergency situations as suppliers are more involved with the company as strategic partners.

· Improvement on “Delivery timelines and Better overall Quality”.

· Business/ Operational development of both businesses (Buyer-Supplier).

· Reputational damage is avoided and product scarcity can be mitigated.

· Above all, an efficient SRM can boost motivation and improve access to innovation

· Reduced operational costs aided with the ability to plan ahead.

· Strategic alignment is made possible with the needs and goals of Buyer-Supplier’s by providing and fostering an environment based on collaboration and partnership.

For the indicated benefits to materialize, there is an urgent need to shift management’s approach from being focused on cost-reduction and concentrate instead around “Value Creation”. An increase in accountability and enforcement of system transparency throughout supply chain is a must, ensuring a fair competition environment by moving towards a larger pool of vendors and shifting risk thereof. This has to be aided with adoption of technology, e.g. e-commerce platforms.

Monitoring and Evaluating Performance

It is integral that a sound monitoring and evaluation practice of supplier performance is continuously undertaken as it positively contributes to “Effective Risk Management”. This further strengthens development and maintenance of strategic supplier relationships and helps boost overall performance. It is critical to note that an effective procurement planning and supplier performance monitoring is critical to having the benefits of SRM realized.

Prior to signing contracts, it is important to properly analyses functional/ performance requirements and have clearly defined deliverable and KPI’s. “Supply Chain Professionals” should consider past supplier performance and make room for,

1- Make part “In-contract Evaluations”

2- Define “Monitoring Procedures and Mechanisms for Measurement of KPI Performance.”

3- Upon contract conclusion, provide and register feedback to suppliers on their performance - suggesting possible improvements on issues identified during pre-contract, execution, and post contract phase.

Sustainability and Corporate Social Responsibility

Corporate social responsibility (CSR) is an emerging term that has taken over the supply chain world with an unwavering focus. Sustainability on the other hand is without a doubt an asset and at the same time a potential risk if not taken in to account seriously. An organization’s corporate image today is very important. This can be interpreted in terms of economic presence, social and environmental fingerprint which depends on Organization’s “Supply Chain” and “Sustainability performance” of each and every link of the chain (including suppliers and sub-suppliers). Ignoring the damage CSR can do to the reputation of the company and financial/ market value thereby, can lead the organization downhill.

Organizations today should continuously and actively on improving sustainability standards by creating incentives for external stakeholders in order to adopt a more ethical and sustainable business approach.

Conclusion

In a nutshell the whole supply chain process improvement for increasing Operational Efficiency can be broken down in to following steps,

· Classification of Procurement Portfolio Goods.

· Identification of Key Suppliers for each classification.

· Engaging Suppliers for developing Partnerships/ Relationships and decreasing risk of stock out and meeting unanticipated demands or sudden technological shifts.

· Expanding Pool of vendors.

· Shifting focus to (Joint) value creation.

· Introducing E-commerce or other platforms.

· Defining deliverable and mechanisms for performance evaluation of each contract.

· Monitoring supplier performance and providing registered feedback for improvement and continuing evaluation.

· Introducing Corporate Social Responsibility and Sustainability practices.

Thanking you,