Supply chain management is a challenging proposition. Ideally, it's a seamless path from execution to customer reception that is almost unnoticed by everyone. When one area breaks down, however, everyone notices.
As the name suggests, supply chain management is a series of linked actions that plan and execute a product's movement. The process begins from materials acquisition and production to distribution through all channels until arriving at its final customer as efficient and cost-effective manner as possible.
Take control of your costs
One of the best ways to increase profits is to manage costs at every stage of your business. Companies that operate best in class supply chains report 50% higher sales growth and are 20% more profitable.1
When it comes to order fulfillment, consider installing an automated system that can expedite the processing of customer orders, discern purchasing patterns and keep track of when machinery needs to be maintained, repaired or replaced. Using and analyzing the resulting data will allow you to make smarter purchases for your business at any given period, keep fewer items in your inventory that eat up costs and provide marketing insights for your team.
Strengthen supplier and vendor management
When Canadian home improvement and construction retailer Rona's CEO Robert Sawyer simplified and fixed the company's supply chain, it led to a 5% increase in same-store sales year-over-year.2
Superior customer service isn't just for the end buyer of your product. Suppliers and vendors influence the service or product you deliver by enabling the success of your supplier chain, and that success partly rests on maintaining good relationships with them. A good relationship can lead to money saved and better margins.
So, how can you improve your relationships and supply chain? Establish a close connectivity with your suppliers and vendors in an effort to understand how their processes mesh with yours, then identify the adjustments that could optimize both. This can include aligning your production cycle with theirs by ensuring orders are placed on time and that all deadlines are set and met.
In addition, you may want to choose suppliers that adhere to internationally recognized standards. The most common is the ISO 9000 certificate, which is recognized in more than 100 countries. This means you and your suppliers will share a preset foundation on quality and operating principles on which you can build your relationship.
Conduct risk management and planning
Planning and risk management in today's business environment are becoming even more important whether companies operate locally or expand globally. As you grow, avoid risk and business planning issues by taking the following steps:
- Maintain clear contracts that outline what you've ordered and establish controls to pay only for what you receive.
- Have a thorough understanding of the laws related to preventing or resolving disputes in the countries in which you conduct business.
- Agree on the timing for periodic assessments. It's key to perform assessments when there are changes in the market that could affect your business, including new products, changes to vendor and supplier costs or if your financial situation has changed. All of these can add additional risk to your supply chain and should be proactively managed and mitigated before they can impact your business.
Protect yourself against fraud and overcharges
With growth comes a higher risk of fraud, including overcharges. One vital area is invoicing and payments. Companies want to pay for only what they order and receive, have the ability to prevent or resolve disputes, reconcile various expenses and prevent fraud.
A solution like American Express vPaymentTM can enable your supply chain management by allowing you to set an exact value a supplier can charge, as well as set the date or date range in which they want the transaction to occur. This gives a company the ability to know and monitor how much they're spending with each supplier, as well as prevent supplier over-billing—one of the most common cases of fraud that can affect your supply chain.
Managing the supply chain is an ever-evolving process that is constantly affected by internal and external market changes. Having a robust set of systems in place that can proactively identify and address these changes can help your company's stable growth.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.