Amazon’s emphasis on fast two-day and overnight delivery has put new pressure on retailers to optimize their supply chains in order to stay competitive. The “Amazon Effect” has led consumers to expect 24/7 delivery, disrupting the traditional shipping paradigm of once-a-day batch ordering.
Shipping providers have had to make major adjustments to adhere to new super-fast shipping expectations, and retailers, too, are under pressure to streamline their supply chain management in order to keep up with the competition. If your supply chain could use an overhaul, consider starting with these three essential steps.
Map out Your Supply Chain Management Strategy
An effective supply chain starts with a good supply chain management (SCM) strategy. To develop your strategy, start by mapping out the steps in your supply chain, identifying each stage your product goes through on the way from your supplier to your customer. Major stages typically include procurement, production, warehousing and transportation, including returns. You should also consider how your supply chain interacts with your marketing and sales processes, since itâ€™s important to make sure your sales cycle stays in sync with your available supply. Likewise, you should correlate your supply chain with your cash flow cycle.
To make your strategy actionable, you should establish key performance indicators (KPIs) you can use to measure the success of your strategy implementation. For instance, perfect order measurement measures the percentage of orders that are error free. Cash-to-cash cycle time measures the number of days between when you pay for your supplies and when you get paid for sales. Customer order cycle time measures the time between purchase order receipt and delivery. Supply chain platform provider Tradecloud lists 17 KPIs that should cover most companiesâ€™ needs.
Set up Your Suppliers, Business Processes and Production Cycle
The second step is to set up your suppliers and business processes. When choosing suppliers, a priority should be finding vendors with a reputation for on-time delivery. You can research vendors by interviewing them, talking to other people in your industry and reading online reviews. You can also try ordering a sample to test out a supplier or product. For instance, o-ring provider Apple Rubber provides samples and quotations upon request. Use online directories such as SupplyChainBrain to assist you in locating suppliers.
Business processes you need to include are systems for managing inventory, setting price levels, accepting payments, fulfilling orders and handling returns. Your returns process should include procedures for assisting customers and for receiving and processing extra items and defective items. Make sure your returns and other processes, such as inventory management, integrate with your bookkeeping procedures so that everything gets entered properly. To streamline your procedures management, the best practice is to adopt supply chain management software.
Another important item is planning your production cycle. In addition to production itself, phases you should map out include testing for quality, packaging products and delivering orders. You should also establish metrics for tracking your performance, such as employee productivity, and product quality and output.
Establish Your Logistics Network
Another key component of a successful supply chain strategy is your logistics network. You should document your procedures for handling orders from customers, invoicing payment receipts, transmitting orders to your warehouse, shipping orders and returning orders.
You will also need to select a delivery service. If youâ€™re operating in the U.S., there are two main categories of delivery service you can choose from. Some services provide confirmation of delivery. These include US Postal Service Priority and First Class package services. Other services provide door-to-door shipment tracking. These include US Postal Service Express, FedEx and UPS. Door-to-door tracking services generally cost more than delivery confirmation services.
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