17 December 2018

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How to Identify and Solve Pain Points in Your Supply Chain

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How to Identify and Solve Pain Points in Your Supply Chain

Being a small business owner you must be aware of the conceptual greatness of your own business. You know your product is great and you know that if more customers buy your products.

 

But at the same time, you must be aware of this fact that you are not able to deliver your great products on time to the so-called enthusiastic customers. And sometimes, even if you ship an order, you don’t have the right services of delivering to that area which you thought you had on hand.

And often, your accounts department informs you that your balance sheet is bleeding red ink as it is costing you more than you thought to maintain products, inventory and ship them.

Do you know what do you have there in your business?

  • Inventory accuracy
  • Customer delivery
  • Cost of goods

And what you have to do to retain all these activities- an accurate supply chain system! The best way to manage it all is by optimizing your supply chain management. In fact, you need to identify the pain-points in your customer delivery, inventory accuracy, and cost of goods. This will enable you to have a sneak peek into the root cause of your problems and implement countermeasures to prevent them from recurring.

Inventory Accuracy

Your deliveries might have been lately delivered due to non-availability of the products which you have thought is available in your inventory but when you looked for them — you couldn't find them. This shows you need to pay attention to your inventory accuracy.

To improve your inventory accuracy and to make it 100 percent accurate, you need to conduct regular physical inventory checks and implement a cycle counting program. To make a physical count of your inventory, you need to close all your inventory transaction activity (shipment, receipts, invoices, etc.) and count every single inventory item that you have in your warehouse. Now, tally that to what your system or records manifest that you thought you had. And then it’s time to reconcile the differences. Do it once every year, it pays.

For this, you can take help of some tools of auditing procedure like cycle counting that can count your some major items each day. This will help you keep a vigil on your inventory accuracy without expending too many resources. This process also reduces the number of items that need to be reconciled when you perform your annual inventory counting.

And — most importantly —​this process helps you to ensure about the products you want to ship are there available and you have it on hand.

Customer Delivery

There are companies that do not include customer service as a part of supply chain management. However, if you run a small business, it’s imperative that the supply chain also offers customer delivery.

If you are not supplying your customers on time every time, do you know what that means? It’s time to investigate your supply chain for its services and benefits and if required, ask for it.

You need to analyze why you are delivering your customers late. This could ideally be because of below-mentioned reasons:

  • Your customer placed the order late
  • Although the customer’s order was placed on time, you didn’t initiate the process in time.
  • You apprehended  that you have the  product to ship, but you did not
  • You had the product to ship but was defective
  • Your supplier supplied you the product late, due to which your delivery was delayed to your customer.

All the above-listed causes of delay in delivery can be managed if you can improve your supply chain lead times which will go a long way toward solving your on-time delivery issues.

Lead Times

You must know how long will it take for your supplier to receive your PO, process it and ship your order for delivery to receive shipments on-time from your suppliers. Now add to that lead time the time that it may take to transport, fly, ship or otherwise transit your order to you.

Once you receive the products — how much time will it take you to receive, inspect and provide any value-add to that product? This is entirely your internal lead time. Now, how long does it take to receive your customer’s purchase order, process it and then deliver it out?

All these processes need to be understood, managed and enforced to improve the lead times that can immensely improve your small business’ on-time delivery promise. Considering the lead times for each process, you need to promise your customers for the shipment and the delivery.

Cost of Goods

Your cost of goods is immensely influenced by the supply chain you have. If the cost of your product is Rs.10 and you sell it for Rs.15, you might think that you're making a Rs.5 profit. But the truth will be with your supply chain person.

The Rs.10 is just the part of your cost of goods. There are many other expenses that your product may require that includes shipping, warehouse management, inspection and insurance for those products. In all these processes might reduce your Rs.5 profit to Rs.2 or Rs.3 profit.

It is always better to work with your supply chain people to reduce the Rs. 10 cost to Rs.9 or Rs. 8. The lesser the cost of goods supply, the cheaper it will become for your customers. This will keep your small business competitive and also help it thrive for a longer time.

 
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