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How do you know if your supply chain management needs optimization? The test is simple: Do your customers get what they want, when they want it, and you spend as little money as possible? If you can’t answer that question or it’s negative, it’s clear –you need a supply chain optimization.
Using blockchain technology is something that might be helpful in regard to this. Blockchain for supply chain optimization is a bit innovative approach. The advantages of using cryptocurrency such as more confidential transactions, easier international trade, etc, can be applied to supply chain management and in optimizing it. How? There are no paper trails, no phone calls… Most importantly, the record of the entire process is kept on a virtual, digital place that’s easily accessible by everyone involved in the chain.
If you don’t spend the maximum money to achieve your delivery goals for your customers, then your supply chain is optimized end-to-end (E2E). Still, as much as you spend (on the cost of goods, in stock, on shipping, on storage, on work, and so on) there are chances that you can spend less. Before we give you some tips, see what does optimization mean. Now, here are 5 ways to start optimizing your supply chain from start to finish.
#1 Managing Tier 2 Supplier
Your E2Esupply chain doesn’t start with your original equipment manufacturer but with “Tier 2“ supplierswho provide major components, raw materials, and sometimes services to other companies. If your Tier 2 suppliers don’t understand the products they are supplying, what their costs are, and that speed in supplying is important – negotiating with them can reduce the costs and delivery times. Or you can help your multiple suppliers find a single Tier 2 supplier.
#2 Cost of Goods Sold (COGS)
What does COGS management mean? Just because you have negotiated a low price with your supplier doesn’t mean that you shouldn’t negotiate when it optimizesits own internal production processes. In fact, when negotiating prices with your suppliers, you should be able to negotiate price reductions from year to year (in the range of 3% – 5%) that are incorporated into your supply contract. And within your organization, you should manage your own process costs – using the Six Sigma tools and the ERP recommendations.
#3 Inventory Management
If you and your suppliers don’t share demand information in supply chain activities– they risk of not stocking enough to meet your needs. Or – just as bad – carry too much inventory. If that’s the case, suppliersspend too much money to meet your demand and that cost will be passed on to you. By sharing demand information with your suppliers (mainly in the form of the forecast with defined time limits that turn those forecasts in orders), they can do their own demand planning to ensure that they optimize inventory management.
#4 Stock Control
How can you be sure that what your warehouse management system or resource planning system says about what you have available is actually what’s available? The goal of every company should be 100% accurate inventory and the only way to achieve this is to carry out a regular, systematic number of cycles and physical inventories. Without 100% inventory precision, you won’t be able to ship all to your customers on time. Lack of inventory accuracy resultsin buyingthings you already have available or buy things you don’t need. Implement a cycle countand check how and what you’re counting to pressure the audit.
#5 Customer Demand Planning
Your customers can send you forecasts, even long-term forecasts. But do they actually know what they want and when they want it? You can use customer demand information (forecasting, orders) as a starting point. But you can do much more in a robust demand planning environment. You can use history, market analysis, seasonality, competitive landscape, and other factors to better understand your clients’ needs than they do. And robust demand planning helps reduce logistics costs, which reduce costs in your end-to-end supply chain.