January 22, 2021 5 min read
Opinions expressed by Entrepreneur contributors are their own.
It doesn’t matter what you sell — if your business produces physical goods of any kind — few things are more important than your supply chain. The supply chain encompasses so much more than just shipping a finished product to a customer. It includes obtaining raw materials needed to manufacture your products, maintaining adequate supplies in a warehouse and more.
Needless to say, it requires a complex web of several interconnected activities — one that can involve several different entities. With so many moving parts, however, it can become all too easy for inefficiencies to slip in.
As the supply chain starts to falter, so does the customer experience. In fact, a survey by Voxware found that 69% of consumers would be less likely to buy from a business again if shipments were two days late. By identifying supply chain problems early on, you can avoid losing customers and keep your business running smoothly.
1. Poor delivery times
You cannot control every variable that could delay the delivery of your products. Severe storms or an accident could cause significant delays when the delivery truck is only a mile from its destination!
However, if poor on-time delivery is a consistent problem (and a frequent complaint), it means that a more serious underlying issue is at hand, such as poor materials handling, production efficiency or faulty lead time calculations.
Automating material handling and using technology to create more accurate lead time forecasts can go a long way in resolving these issues. Smarter forecasting enables material orders to be placed in a timely manner, as well as helping with any distribution timeline adjustments that need to be made.
Even unexpected sources could be contributing to delayed processes and deliveries. In an interview for Material Handling & Logistics, Paul Morel of Strategic Systems notes, “Manufacturers should compare different machines that have the same processing capabilities to see if there are any processing time differences that aren’t being accounted for in their supply chain analysis.”
Carefully evaluating each stage of the supply chain will prove essential for finding the root cause of frequent late deliveries.
2. Product protection during transport
While packaging products in a way that protects them from bumps and jostling during the transportation process is a given for any manufacturer, many items need additional protection that goes well beyond this.
Items such as medicine, flowers, and food products require strict temperature control at each stage of the supply chain. The freezing temperatures that Covid-19 vaccines need to be stored during transport have helped bring this issue to the forefront like never before.
Despite this, supply chain data company Logmore reports that roughly 20% of pharmaceutical freight is damaged during transportation, due in part to a lack of temperature monitoring.
As the company’s blog notes, “There are a few types of temperature monitoring systems available in the market. Some are meant for pharmaceuticals, and others are for the food industry. Each type has a different capacity for measuring temperature.”
“Continuous data capturing means that you can see if any protocols have been compromised,” the Logmore post continued. “Furthermore, continuous data recording will allow you to capture spikes and dips, analyze anomalies and more.”
3. Recurring product shortages or obsolete inventory
Product shortages and obsolete inventory are seemingly opposite problems with similar causes. When you inaccurately gauge demand for your product and fail to ship enough of it to distributors, sellouts will occur quickly.
Alternatively, obsolete inventory occurs when poor demand forecasting results in large numbers of unsold items. Instead of selling out, these items simply take up space on store shelves. Local distributors and franchisees bear the cost of keeping these items in stock, even if they don’t want to.
With poor demand forecasting, you will continue to see one (or both) of these issues with your products. Over time, this can sour relationships with distributors, who bear significant financial consequences from such inventory issues. It can also create dissatisfaction with your customers. Over time, this can lead to decreased demand for your products, leaving you with large amounts of obsolete inventory in your own warehouses.
Manufacturing limitations can sometimes also contribute to product shortages — as with the recent launch of the PlayStation 5 and the new Xbox Series X consoles. Massive shortages that are expected to last into 2021 have resulted in scalpers selling the video game systems for nearly twice their retail value on the secondary market.
By better defining your sales pipeline, asking distributors to forecast demand for your products, and using statistics and smart data, you can develop more accurate forecasts. Such insights will help you better prepare for actual demand and potentially eliminate low-performing products entirely.
Focusing on your supply chain may not seem as exciting or glamorous as your latest marketing campaign, but few things will prove more important for your brand’s long-term success.
By using better data for tracking, forecasting and other vital activities, you can have confidence that your supply chain will deliver desired results for you, your business partners and your customers.