What is Supply Chain Efficiency, and How to Improve it?

Published on 06 Jan 2023

Supply, Chain, Efficiency

The enemy of expansion in your ecommerce supply chain is complacency. Regardless of your supply chain's efficiency, you should constantly look for methods to enhance it.

However, understanding how to enhance and improve your supply chain may take time - not just for small firms but for established ecommerce companies as well. Hence, in this blog, we’ll talk about what is supply chain efficiency and how businesses can improve supply chain efficiency. 

Also Read: Tips for Investing in Technology Stocks

What Is Supply Chain Efficiency?

Supply chain efficiency is the capacity of a firm to utilize its resources, technology, and experience to reduce logistical expenses and increase revenues. The objective of an effective supply chain is to conserve money and enhance revenues by improving the supply chain's operations and phases.

What Is The Difference Between Supply Chain Effectiveness And Efficiency?

Supply chain efficiency is the internal performance benchmark of a business, while supply chain effectiveness is the outward performance standard.

In other terms, supply chain effectiveness concentrates on satisfying the expectations of groups outside your firm. In contrast, supply chain efficiency refers to satisfying these requests as swiftly and cost-effectively as possible.

What Is Responsive Supply Chain Management?

Supply chain responsiveness entails responding swiftly to abrupt environmental shifts influencing your logistical activities.

Examples also include the capacity to expand when the COVID-19 pandemic struck (i.e., increasing production for more than almost double the amount of usual online orders when lockdowns were implemented) and quickly shipping inventory during some of the world's busiest ports were completely congested with container ships.

Elements Of A Flexible Supply Chain

What distinguishes standard supply chains from flexible supply chains? You might argue that chance is frequently on the side of flexible supply chains. Still, there is a great deal more involved behind the scenes, such as diversifying suppliers and carriers and installing linked technology that allows real-time tracking throughout the supply chain.

The foundation of a flexible supply chain is adaptability, which involves responding to changes and anticipating them.

A flexible supply chain has the following goals:

  • Satisfying consumer needs (delivering on time and at the expected cost)
  • Being able to scale up or down in response to inaccurate demand projections
  • Cost management in turbulent times
  • Continuously enhancing processes and procedures to meet current requirements and circumstances.
  • Reducing risk via diversity, preparation, and the formation of suitable relationships

There are various essential players (and often third parties) engaged in maintaining the successful operation of a responsive supply chain, including:

  • Your company's executives
  • Your suppliers and manufacturers
  • Your distribution center(s) and 3PL
  • Your technological companies
  • Your transport companies
  • Your clients

All of these parties must be effective communicators with two-way communication.

Supply Chain Efficiency Vs Responsiveness

Supply chain efficiency focuses on accomplishing more with less, while supply chain responsiveness focuses on agility and surviving when things don't go as planned. But in reality, supply chain efficiency & supply chain responsiveness are interdependent since supply networks are among the most variable and fragile aspects of the business.

Ultimately, it's not a matter of having an efficient supply chain vs. a responsive supply chain, but rather a coherent supply system that can move swiftly and adapt without incurring a financial loss. Monitoring metrics for productive and responsive supply chains include on-time fulfillment, profit margins, delivery speeds, and more.

They share the same objective of achieving client expectations.

Five Ways To Increase Supply Chain Efficiency

Whether your online firm is brand-new or well-established, boosting supply chain efficiency is daunting. If you don't know where to begin, here are the top 5 ways to improve supply chain efficiency:

Step 1: Add the visibility of the supply chain

Increasing visibility into logistics operations is the first step in enhancing supply chain efficiency.

Implementing inventory management systems that enable you and your team to monitor inventory levels as they travel through phases, from receiving to warehousing to being packed, selected, and dispatched to clients, is the optimal method for achieving this goal.

Modern inventory management software (IMS) may provide enhanced visibility and real-time inventory monitoring, allowing you to minimize stockouts, backorders, and excessive carrying costs.

Installing an IMS gives you access to data and analytics that enable you to make intelligent business choices, such as inventory forecasting.

Step 2: Establish a positive rapport with your suppliers

Communication with your vendors is crucial! When you have an excellent connection with your suppliers, you plan more effectively and anticipate and prevent any shortfalls, delays, or problems.

A trustworthy supplier is accountable for monitoring the work-in-process inventory stage (i.e., the flow of raw materials being converted into completed items), affecting the product quality you sell and the speed with which you may receive more inventory.

Suppliers that offer inconsistently high-quality products may slow down your supply chain from the start; therefore, it's essential to be careful and eliminate suppliers who routinely need help with your procurement.

Once you have identified dependable and adaptable suppliers, you will need to maintain these relationships via open communication and dispute resolution.

Step 3: Automating your supply chain procedures

Automating supply chain operations is one of the most effective strategies to enhance efficiency, minimize human error, and boost the supply chain's performance and speed. It could save money and time.

Automating time-consuming procedures, such as order processing and automated shipment, does not eliminate the need for human labor, but it can assist in simplifying operations and boosting efficiency.

Common in logistics, warehouse automation minimizes time, work, and mistakes. Some company owners automate their warehouse logistics by utilizing their equipment and technology.

Due to the expense of automation technology, machinery, and robots, many ecommerce firms depend on a tech-enabled 3PL that has invested in automation to improve their supply chain.

Thus, organizations can spend more on product design, marketing, and other crucial endeavors.

Step 4: Put supply chain software in place

With so many concurrent operations occurring throughout your supply chain, it is essential to adopt the software & technology that enables your team to operate as effectively as possible.

If you handle warehouse operations across multiple locations, you should use a warehouse management system (WMS) that integrates with your inventory management system (IMS). This can help automate order processing and provide real-time inventory counts, order management systems, data reporting, and analytics.

Creating a comprehensive technology stack may be expensive. Thankfully, many direct-to-consumer (DTC) firms collaborate with a 3PL that already has the technologies required to enhance supply chain efficiency.

Step 5: Create supply chain specialists

After adopting the aforementioned modifications, the following step is establishing a training schedule for your personnel.

Remember that the efficiency of your supply chain depends on the people who administer it. Standard operating procedures should be taught to warehouse workers, order fillers, and logistics personnel to ensure consistency, efficacy, and precision in their decision-making.

If an individual has been with your organization for a significant time, get their input on how your warehouse staff might enhance operations. A 3PL may offer the necessary supply chain management skills if you need a logistics crew.

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While supply chain efficiency focuses on doing more with fewer resources, supply chain responsiveness emphasizes adaptability and staying afloat when things do not go according to plan. Nevertheless, name a supply chain that is not continuously unpredictable and fragile! Focusing on critical metrics such as on-time fulfillment, profit margins, shipment speeds, lead - time, and more, you need an efficient and responsive supply chain to move swiftly and react without losing money.


Featured image: Image by Freepik


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