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A company’s great vision doesn’t always flow down to the professionals who manage the supply chain. The robust strategies that are developed at the C-level in an organization often gets “lost in translation” as they trickle down through the company.
However, bridging the gap between the strategic vision of C-level employees and the information received by the professionals managing the company’s supply chain isn’t as difficult as some would think.
Whether your company is a startup or a Fortune 500, it no doubt continuously improves, scales, and shrinks the supply chain to meet demands and appropriately manage cash flow. Here are some ways successful early adopters of supply best practices can take control of their supply chain to mirror the vision of those leading the company.
Create the Right Procurement and Supply Chain Team
A robust supply chain department starts with employing key people who are resourceful, cost-conscious, masterful planners, and demonstrate a high level of expertise to qualify the best suppliers for the company’s needs.
This group should be actively engaged in providing guidance to the service and commodity procurement groups so that your supply chain strategy is aligned throughout your organization. Consistent cross-functional communication between departments will ensure that all personnel are following the same set of objectives.
Implement Key Policies and Procedures
Policy authoring and implementation are often described as the distinction and separation stages within policy cycles.
In the policy development stage, both political and technical issues must be identified and adopted. Political issues include negotiation, establishing a vision, and managing conflict. Technical issues include gathering evidence and data of what works, implementation planning, and other critical steps required in governing policy growth, including community consultation.
Procedures are best written proceeding policies. They should include process inputs, outputs, activities, tasks, process communication, goals, and objectives.
Once policies and procedures are established, they must be enforced. Each member of supply chain management needs to take ownership in doing their part to maintain policies and follow procedures.
Identify Your Material, Commodity, Logistics, and Service Requirements
Putting together a material requirement plan (MRP) is critical. Once you identify all that you need to procure through the supply chain, you can establish your criteria for a great supplier and easily seek out suppliers to fill those requirements. Having at least three sources for each supply is generally a good practice.
Develop a Supplier Qualification Survey (SQS)
Creating a standard by which to qualify suppliers is of paramount importance. It will serve as a guide to identify, qualify, and approve each link in the supply chain. Checking in with suppliers each quarter will help identify and replace weak or under-qualified links in the supply chain.
Qualify Vendors
Now that you’ve created an SQS, researching and locating vendors that meet your criteria will be simplified. Checking references, conducting an onsite vendor survey, and referring to vendor reviews is the best way to get the qualification process in motion.
Next, you’d want to give your vendor an RFQ (request for quotation). Giving your potential vendor a small order to test quality, performance, service, and delivery will help you decide if they are worthy of vendor approval for larger orders.
Secure the Best Price
In most instances, you will more than likely enter into negotiation with each supplier in an effort to secure the best pricing for your company and your supplier. Giving your suppliers longer lead times and target pricing can help avoid the pitfall of burning too much cash in the supply chain too quickly.
Engage in Forecast Ordering
Issuing monthly, quarterly, or bi-annual purchase orders can help suppliers pass on material and labor cost savings to you. The farther in advance you can buy, the better your chances are of securing lower costs and ensuring on-time delivery.
Ensure Quality Assurance
Installing a quarterly quality assurance (QA) audit system with each supplier can help to make sure that vendors are maintaining the quality standards you expect. It is also important to identify any changes that need to be made to improve your product.
Manage Inventory
Using a good ERP system coupled with a great physical inventory checks-and-balances system will help you control costs and inventory replenishment. It will improve inventory accuracy and cycle counting. Allowing vendors to run reasonable overages may help you in times of shortages.
Build Vendor Relationships
One common mistake make by procurement departments is that some choose vendors solely based on low pricing. More than likely, if you opt for the lowest price, you will have to give up on-time delivery or quality.
Building good relationships with a select group of suppliers is key. Articulating what your requirements are on a regular basis will help align the mindset of your supplier with your supply chain objectives. Vendors will be prone to become more invested in your company by continuously seeking opportunities to provide better costs, higher quality, excellent service, and on-time delivery.
Utilize Technology
Utilizing technology across your entire organization, using highly functional data drive platforms, and implementing automation to manage your supply chain will keep your company ahead of any potential problems.
Image Credit: Alberto Menendez Cervero / Shutterstock.com
