How to Build a Responsive Supply Chain - 4 Methods
While it is important that a business can efficiently and quickly deliver goods to shoppers, it is also crucial that its supply chain is responsive to market demands.
By being responsive and adaptive to changing customer preferences, companies can gain a competitive advantage, minimize instances of lost sales, and achieve consumer satisfaction.
What is a Responsive Supply Chain?
A responsive supply chain is agile and flexible enough to meet the needs of the company and its customers. Organizations that have a responsive supply chain are able to ensure 4 key business functions.
- Order Fulfillment Accuracy - All customer orders are accurately fulfilled and quickly delivered to their end destination.
- Scalable Delivery - Sales volume and demand continue to change due to economic fluctuations, new seasons, and weather. A responsive supply chain can promptly adapt to these shifts and satisfy consumer expectations.
- Communication - There is an open line of communication between the business and its customers.
- Customer Happiness - Customers are more satisfied when they have the freedom to ask questions, return products, or edit their orders. Providing high-quality and flexible customer service will ensure overall satisfaction.
What is Supply Chain Efficiency?
Efficient supply chains help businesses save money and maximize their profit margins since the flow of goods is moved in the most cost-effective way.
This is important for modern companies because if supply chain expenses are high, it can impact the prices of products. Consequently, this can affect a brand's ability to compete with other companies who offer the same goods for better prices.
Unlike supply chain responsiveness, efficiency emphasizes protecting a business's bottom line and ensuring that end products are priced competitively.
There are 4 key benefits of supply chain efficiency.
- Optimization - Shipping routes, warehouse layout, and workforce productivity are optimized. Wasteful assets, such as unused trucks and space, are reduced or eliminated to prevent unnecessary spending.
- Reliable Suppliers - Reliable suppliers ensure goods are delivered at an agreed time and in the right quality and quantity, allowing the business to satisfy customer demands seamlessly.
- Inventory Management - Proper inventory control helps management make sure they have optimal levels of stock at all times.
- Customer Satisfaction - Excellent customer service is provided since shoppers can get the goods they want promptly and at an affordable price.
How to Build a Responsive Supply Chain
One of the proven ways that a company can satisfy the ever-changing demands of consumers is by building a responsive supply chain. This type of supply chain can also help owners mitigate disruptions, such as emergency crises and unreliable suppliers.
There are 4 best practices to create a responsive supply chain.
1. Gain Better Visibility with Software
Businesses that implement new software developments to their supply chain management can gain clearer visibility into the movement of their goods. Modern inventory management software, for example, allows business users to track their inventory levels in real-time and monitor their waste using a mobile app.
These tools also offer reports and insights into spending and profitability, enabling management to make decisions about their inventory swiftly and to procure new products to ensure they are meeting customer demands.
2. Collaborate with All Partners
It is important that businesses thoroughly communicate and inform their partners, suppliers, and third-party logistics providers of new purchases or updates regarding the status of an order.
This guarantees that every one that is involved with the movement of goods is on the same page, which will minimize any inaccuracies or miscommunication.
3. Conduct Multiple Forecasts
Projecting demand can be difficult and if inaccurately done, it can lead to lost sales or excess inventory in the warehouse. Instead, businesses should conduct multiple forecasts that showcase different potential outcomes, such as one with low demand and another with high demand.
This will help management plan various strategies and be prepared to deal with whichever outcome that materializes.
4. Establish Supplier Contracts
Creating a contract with suppliers will ensure that they agree and adhere to the expectations and specifications of deliveries.
When outlining a contract, management teams should consider the supplier's profit margin and their business values. This will ensure that the agreement is fair for both parties involved.
There are two forms of contracts that can be created.
- Flexible Contracts - These documents detail the supplier performance that is expected by the business. They are considered flexible because it is an outcome-based contract; meaning production orders are fulfilled based on demand. This helps companies satisfy customer needs quickly as possible.
- Partial Contracts - This type of contract enables distributors to maximize their capacity and improve the efficiency of their transportation route.
A responsive supply chain is crucial to a company's ability to stay on top of turbulent market trends and consumer demands. By using these tips to build supply chain responsiveness, brands can strengthen their agility and safeguard their profitability.