Any organization wish to have continuous enhancement in its profitability on YOY basis.
One of the better ways to ensure this will be to reduce supply chain costs with remaining competitive.
Supply chain costs range from 5.5% to 12% (measured to sales value) depending upon Industry and company products mix.
One may reduce supply chain costs by various ways by moving towards lean supply chain.
Moving towards lean supply chain means eliminating waste — reducing working capital; enhancing operational productivity; improving quality and reliability.
Just detailing herewith some of the measures to move towards lean supply chain
1)Make Supply Chain more compact – Optimize flow of goods and information. Implement Plant and warehouse layouts that streamline inbound and outbound flows.
2) Reduce Inventory at point-of-use – There are many ways of ensuring inventory reduction.
I am detailing some of those which we worked upon during one of my organizational stints
A) There were more than 100 vendor partners who were delivering finished goods to the warehouses. Vendor partners also had MOQs constraints and they were delivering from various parts of country. We needed to look at each vendor partner separately and tied our purchase orders to the day when vendor’s depot was being serviced from its manufacturing location. We mapped sourcing point of vendor partners so as to clearly understand total lead time in the system for delivery up to warehouse. Also Purchase orders were linked to case size of the SKU to get frequent shipments eliminating damages in transit.
B) Quality norms at our warehouses were streamlined and communicated to the vendor partners.
C) Forecasting system was fine tuned to reduce buildup of higher inventory to compensate as safety stock in case of any fulfillment issue from vendor partner.
D) We worked with various national/local courier partners to tighten up delivery and reverse logistics process.
3) Reduce capex by monitoring empty vehicles-Well managed empty container flow will reduce maintenance and container replacement costs. Also reverse logistics process need to be managed well.
4) Work Scheduling – Scheduling in manufacturing/warehouse will ensure minimal waiting time and maximum productivity.
5) Follow Transportation practices – Employ recognized transportation best practices to avoid wasteful internal transportation processes. There are many concepts which can be applied here like direct dock to line feeding or combining cycles (one full against one empty) etc.
6) Standardize warehouse processes – Implement stable and repeatable process and standardize tasks like pocking/packing and put-away.
7) Employ Visual management aids – If everyone in the warehouse/shop floor can see the current production/picking status, the reaction to peaks and valleys will be must faster.
8) Correct line stoppages instantly – When a problem arises, correct the problem rather than waiting. One may have slow productivity for that period though in the long run it will be beneficial to correct the problem.
Battle to improve profitability will always continue for any organization; review of supply chain efficiency will always surely help the cause for both improving profitability and ensuring customer delight.
