Five Strategies for Supply Chain Excellence

How, then, do we future-proof our supply chains? What steps can we take now to prepare ourselves for whatever is coming next? We believe in the concept of “Supply Chain Excellence”—developing strategic, best-practice approaches that strengthen supply chain businesses over the medium- to long term. Get this right and we’ll be able to handle almost anything the world throws at our businesses.

Broadly speaking, we think this translates into five key areas:

• Resilient sourcing strategies to diversify supply chains and remove vulnerabilities.
• Digital sourcing, product development, and procurement as COVID-19 continues to impact travel and we move to remote-first solutions.
• Supply chain sustainability to reduce environmental impact and meet stringent regulations.
• Remote production management to increase transparency, accountability, and standards.
• Efficiency and cost reduction through process improvement and quality management.

We’ll explore each of these and the actions you can take right now to prepare for the future.

Supply Chain Risks and Challenges Mean We Need to Step Up

If there’s one thing we’ve learned from recent times, it’s that the world is incredibly unpredictable—the scope, interdependence, and complexity of supply chains means that change can be slow. The change is needed though, and you can get ahead of the curve:

• Difficulties caused by COVID-19—supply chains can continue adapting to the pandemic by embracing remote sourcing, production monitoring, quality control, and other areas.
• Stricter laws and regulations on supply chains—we can get early sight of compliance, obligations, and potential exposure.
• Increased taxes on waste and carbon—as responsible supply chain managers, we can track and reduce waste and emissions to limit taxation and protect the bottom line.
• Ongoing trade wars and tariffs—good contingency planning can reduce the impact of economic sanctions and protectionism.
• Greater NGO scrutiny and pressure—we can work alongside non-governmental organizations to raise awareness of supply chain practices and commit to greater transparency and responsibility.
• Growing importance of sustainability—responsible governance and environmental stewardship is no longer an optional extra and we can build them into every part of the supply chain.
• Changing consumer behaviors—the ethical sourcing, manufacturing, and provenance of products is playing into changing customer demand and purchasing patterns and that can be part of our competitive advantage.

There’s a lot to do to gain true excellence, but a strong plan supported by engaged stakeholders and the right technology will help us get things right.

“More advanced companies have permanent supply-chain risk-management teams and processes in place. The leading automotive OEMs, chemicals, and electronics companies with very complex global supply chains generally belong to this group. The information cascade between the supply-chain risk-management team and other functions such as marketing, IT, and legal is well-established, with clearly defined interfaces. In the case of disruptions, these teams exchange information on the fly and react quickly.” —McKinsey, Supply chain risk management is back

Strengthen Supply Chain Resilience Through Diversified Sourcing Strategies

We can’t rely on one specific set of sourcing, manufacturing, or other partners to maintain a healthy, adaptable supply chain. Instead, we need to build resilience and contingency for every stakeholder and handoff. This means we don’t put all our eggs in one basket and provide a fallback position so that disruption in one part of the supply chain can be limited.

Getting Supply Chain Contingencies in Place

1. Complete an end-to-end supply chain audit to identify your most critical partners and single points of failure.
2. For critical partners establish their contingency plans and service levels to see if they meet your supply chain risk management standards.
3. Review alternative suppliers, manufacturers, logistics, and distributors that can step in if parts of your supply chain are disrupted.
4. Get contracts in place with both existing and new partners detailing the terms under which you may transfer from one partner to another.

Managing Supply and Demand Spikes

1. Identify customer and partner demand and product inventory areas through the year.
2. Model various demand and disruption spikes to establish realistic stock levels, especially for critical components.
3. Ensure you are holding enough stock to meet demand or have a short enough lead time to maintain inventory.

Careful forward planning is essential to building your supply chain contingency and continuity plans. Being able to failover to alternative sourcing and manufacturing will significantly boost your supply chain resilience.

“By working with a larger set of suppliers, companies can gain agility to adapt to a constantly changing market. While speed to market is a critical component of your supply chain, it also allows you to engage with a range of suppliers that can provide you with an outside lens into your business and offer you access to new ideas and approaches from creative minds outside your organization.”—EY, How to better supply chain resilience in 2021

Digitize your Sourcing, Product Development, and Procurement Processes for a Remote-First Approach

The travel disruption caused by COVID-19 has created big problems throughout the supply chain. Some of the most significant issues are also some of the most invisible—the buying and procurement processes. Necessity is driving us towards virtual and remote platforms, but the supply chain managers who really embrace this technology can create a big competitive advantage.

Making the Most of Virtual Sourcing

• Initiate your product ideation processes and provide buyers with collaborative communication and design tools.
• Talk to suppliers and manufacturers and request interactive, immersive, digital experiences of their products.
• Create processes for the rapid exchange of tech packs, product details, and other vital factors for reduced-effort production.
• Investigate virtual trade shows and showrooms that are showcasing new releases and innovative products in your niche.
• Create a virtual product tracking system to allow for side-by-side comparisons of real-life products from a remote perspective.
• Redesign tendering and order management to focus on a remote-first approach and creating transparency for all supply chain stakeholders.

You can continue to offer innovative, inspiring products even if you can’t travel to your supplier’s destination or visit real-world trade shows and exhibitions. Virtual technologies bring the products to you, so you can boost your digital sourcing and procurement processes and get your goods into the consumer’s hands.

Embrace Supply Chain Sustainability and Environmental Practices

Climate change and environmental awareness are driving laws, regulations, and consumer attitudes. A proactive approach to managing environmental risks and promoting an ethical supply chain keeps you in step with compliance and gives consumers more reasons to buy from you.

1. Review the carbon emissions that your supply chain produces and engage with suppliers and manufacturers to bring emissions down.
2. Investigate sustainable packaging initiatives that can reduce waste and environmental impact.
3. Audit chemicals and other raw materials used in manufacturing to identify hazardous substances and practices that impact workers, consumers, or the environment.
4. Take your Environmental, Social, and Governance (ESG) responsibilities seriously and create accountability throughout your organization and supply chain.
5. Complete social audits that take account of your supply chain’s impact on workers, communities, and the local environment.
6. Understand human rights and environmental concerns and how you’re contributing to or resolving those issues.

You can fulfill your business duty to supply chain sustainability and make it into a competitive advantage as you market to ethical consumers—and that’s good for everyone.

Encourage Supply Chain Transparency Through Remote Production Management

Order and product management needs to be fast, easy, and transparent. That means:

• Centralizing all of your order and product management on one platform.
• Ensuring buyers, merchandisers, suppliers, and manufacturers integrate together to provide tracking against product milestones.
• Developing reports that give you an at-a-glance understanding of orders and product flow.
• Getting early notification of potential delays or bottlenecks.

Drive Efficiency and Cost Reduction Through Process Improvement and Quality Management

Quality management is the final piece of the supply chain excellence puzzle. Inefficient processes and faulty manufacturing creates many hidden costs that get absorbed into your organization. Focusing on high-quality products that meet safety and usability needs will also ensure you meet any necessary regulations.

• Understand the key metrics, thresholds, and benchmarks you will use to guarantee that products will meet your manufacturing standards.
• Integrate externally-mandated standards around areas like product safety, accessibility, and similar areas.
• Insist that factories and supply chain partners provide comprehensive quality monitoring and measurement in line with your criteria.
• Create continual improvement processes that identify manufacturing issues early, maximize efficiencies, and streamline factories. 
• Tie these improvements back to cost control and your bottom line so you know the real-world impact.
• Incentivize suppliers to make improvements and document their goals in your contracts.

Strong quality management will benefit everyone, with guarantees that raw materials, parts, and finished products will meet all necessary standards. This lets you provide your products with confidence, knowing that you’ve met regulatory guidelines and consumer needs.

“Performance management is indeed changing tremendously. Whereas in the past, the generation of KPI dashboards was a major task and KPIs were only available at aggregated levels, now granular data is available in real-time from internal and external sources. This moves the performance management process from a regular, often monthly process to an operational process aimed at exception handling and continuous improvement.”—McKinsey, Supply Chain 4.0 – the next-generation digital supply chain

You Already Have a Good Supply Chain, It’s Time to Make it Excellent

Terms like “Supply Chain Strategy” aren’t just words in a business plan—they have a significant real-world effect on the products that your customers use every day. It’s a win-win situation—supply chain partners benefit from clear requirements, consumers benefit from ethical sourcing and timely availability of products, and everyone benefits from improved sustainability.

At the same time, your business gets to bring its costs down, shorten lead times, manage risk more effectively, and meet strict regulations and compliance. Supply chain excellence minimizes supply chain disruption and boosts your competitive advantage.

What’s not to love? The time to start is now.

Topo is a whole new breed of supply chain management software. It is a powerful collaboration, automation, and analytics platform connecting all sourcing, quality, compliance, and sustainability stakeholders. You can easily collaborate with all members of your in-house team, manufacturers, and service providers throughout your supply chain.