Having a focus is essential for an organization to avoid the negative consequences that can arise from a lack of it.
What are the key areas you should focus on in your supply chain?
How can focusing on these areas benefit you?
Watch the full video to find out!
Top Focus Areas for Supply Chain Improvement
In a recent discussion, I outlined five common fixes for supply chain issues in 2023. Now, I want to shift the focus to three crucial areas that organizations should prioritize to enhance their supply chains, whether it’s improving cost performance, service levels, or achieving best-in-class status. With 30 years of experience in this field, I’ve found these areas deliver substantial benefits.
Cost to Serve Analysis
First and foremost, conducting a cost to serve analysis is vital. This analysis helps identify and address profit and cash leaks within your supply chain. Given the current cost pressures, understanding and managing cost to serve is more important than ever. Many organizations are surprised to find that a significant portion of their orders may be losing money. For instance, I’ve seen companies where up to 80% of their orders left the warehouse at a loss. This highlights the importance of cost to serve analysis in optimizing profitability. If you haven’t done this analysis yet, I recommend checking out our 14-minute video master class on cost to serve analysis for detailed guidance.
Distribution Network Review
The second key area is reviewing your distribution network. Distribution networks often become outdated and fail to align with current business needs over time. Assess how products flow through your network and the number of times they are handled. Inefficient product flow can lead to unnecessary costs and delays. Additionally, evaluate your stockholding locations to ensure they meet current demands. Adjusting your network to address these issues can lead to significant improvements in both cost efficiency and service levels. Regularly updating your distribution network is essential to maintaining competitiveness.
Balanced Inventory Management
Lastly, effective inventory management is crucial. The recent trend of increasing inventory levels due to various factors has led to imbalances, such as overstocking certain items while running out of others. Proper inventory management ensures stock levels are balanced across different categories and service levels. This balance is key to meeting customer demand while minimizing costs associated with excess inventory or shortages. Even large organizations often struggle with this balance, so it’s essential to continually review and refine your inventory management practices.
To sum up, the three major areas organizations should focus on to improve their supply chains are:
- Cost to Serve Analysis – Identifying profit and cash leaks.
- Distribution Network Review – Ensuring the network aligns with current needs.
- Balanced Inventory Management – Maintaining proper stock levels across categories.
By prioritizing these aspects, you can drive significant improvements in your supply chain, enhancing both cost efficiency and service quality.
Related articles on this topic have appeared throughout our website, check them out:
- Top 6 Supply Chain KPIs: Keep Your Dashboards Simple
- 3 Common Inventory Management ‘Sins’—And How to Avoid Them
- Cost to Serve at a Glance: 9 Steps to Success & 5 Mistakes to Avoid
- 10 Reasons to Review Your Distribution Network Design
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated July 5, 2023, under the title “Top 3 Things Organization Should Focus On“.
