Find out how to reduce costs, improve quality and increase your productivity through proper supply chain management.
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Logistics brings together all the necessary methods for the correct operation of a company. For a company to be competitive, it must have good management of its supply chain, considering aspects such as transportation, shipments and inventories . Sometimes it is necessary for the company to adopt structural changes to improve its logistics; in others, they are small modifications that make processes more efficient.
Finally, the correct administration of this area has direct effects on the quality of the service and the costs of the product; and this is where you can find competitive advantages and added value for your clients.
Below we share the areas that you should consider to improve your logistics and be more competitive:
1. Application of technology in supply chain
These are tools that facilitate visibility in the supply chain, providing information about the processes and improving the exchange of data between all members of the chain.
Some of the basic systems are:
- ERP: integrated management systems
- RFID – Radio Frequency Identification Systems
- S&OP and CPFR: are B2B technologies and help order processing in product delivery
- TMS: transport management. Used in collaborative relationships with carriers, suppliers, and customers
- CGA: Warehouse Management System
2. Inventory management
The main objective of this practice is to ensure the availability of materials and products to satisfy the demand. Here the key is to define processes to efficiently manage the products.
- Use coding practices to identify materials and products. It facilitates standardization and is essential for quality processes.
- Use classification practices (for example, ABC to classify materials according to their importance).
- Manage stocks in a synchronized way for inventory optimization.
- Implement a just-in-time policy to keep inventories at good levels and reduce storage costs.
- Take advantage of the postponement strategy, which allows you to delay product customization as much as possible, to better respond to demand.
- Invite suppliers to manage inventories. This is called VMI and the goal is to improve the manufacturer’s service to the end customer.
- Acquire advanced planning systems (APS) software to solve problems in the supply chain.
3. Warehouse management
In some companies, the warehouse can account for up to 60 percent of costs. Learning to manage it is key to competitiveness. How can you do it? Here are some ideas:
1. Use automatic collection systems that increase the efficiency of resources related to warehouse management.
2. Strategically plan the supply network. Find the most economical way to send and receive the product, maintaining quality and customer service.
3. Use shared warehouses. It is recommended for SMEs that have changing geography, as it allows them to be flexible.
4. Have buffer stores. They allow a more dynamic distribution and ensure a quick response.
4. Transportation management
This area often represents high costs in organizations, so improving its management is essential for competitiveness. This includes implementing network design strategies and some of the best practices are:
- Traceability of the cold chain. This point is key in the food chain as it is responsible for temperature control throughout the distribution process.
- Traceability and security throughout the supply chain. This will help you to know the history, location and trajectory of a product for stock and production control and coordination with distributors.
- Use of Crossdocking. It has advantages such as daily deliveries to stores, control of the chain, accuracy in deliveries and savings in transport.
- Use of multimodal transport. It is efficient for the transport of materials and products. It also facilitates international transportation.
- Groupage I mplementation. It is used in rail and road transport, by means of a load for several companies. It serves to reduce rates and limit the risk of the client.
- Outsourcing. Outsourcing this process allows you to reduce costs and improve efficiency.
- Reverse logistics. They are all the processes and activities to manage the return and recycling.
5. Outsourcing of logistics services
Outsourcing these processes is a good practice to improve competitiveness. This includes shippers, logistics service providers, and integrated service providers. Specialists use advanced technology, with the intention of providing the best service, such as electronic communication tools. For this scheme to work, you need to implement collaborative practices with these providers. Costs will decrease and your efficiency will increase.
6. Supply management
At this point, good planning is required to improve supplier-customer coordination. Take note of some of the best practices:
- Include purchasing management in the planning of the company, to align them with the business objectives.
- The supply area must know the business strategy. This to choose the most appropriate management for the company. The sourcing function, in terms of costs, quality and service levels of the suppliers, must be chosen based on the business strategy.
- Performance should be measured, based on contribution to the business. In other words, having clear metrics to identify the relationship between good purchasing management and results.
7. Use metrics
As in any area of the business, logistics requires measurement and feedback, using indicators such as Inventory Turnover, Cost of Goods Sold and Return on Assets.
These are some tips you can follow:
- Use the SCOR model to have objective measurements of the supply chain.
- Consider logistics costs as part of sales (generally they are between 8 and 10%).
- Define the number of deliveries on time. It is measured as the proportion of the product that the customer received on time with respect to all the product that was sent to him by the supplier.
- Measure the days of inventory. That is, the efficiency of the inventory and the days of rotation.
8. The relationship with suppliers in the supply chain
It is required to integrate business processes to respond correctly to the customer. For this, it is necessary to achieve collaboration between all members of the supply chain, through mutual trust and the exchange of information.
- Assign staff to manage the relationship with suppliers.
- Deliver timely feedback to suppliers regarding their performance.
- Measure the customer’s perception of the supplier.
- Establish long-term contracts that benefit both parties.
- Facilitate mutual cooperation.
- Have regular meetings to understand your expectations and concerns.
- Share long-term business plans.