The business of supply chain management involves many stakeholders including business units, vendors, suppliers, truckers, warehouses to name a few. Successful supply chain management can be achieved through the implementation of best practices in all areas of the chain including, planning, sourcing, production, and distribution. This in turn ensures efficient service delivery and improves profit.
Below are some of the best practices in supply chain that companies can implement to be successful, sustainable, and profitable.
An organization’s supply chain encompasses everything from sourcing raw materials to delivering finished products to customers. With so many moving parts, implementing supply chain best practices is essential for efficiency, cost savings, and aligning operations with business objectives.
In this comprehensive guide, we’ll explore what exactly supply chain best practices are, why they matter, and provide actionable tips to optimize your end-to-end supply chain management
What Are Supply Chain Best Practices?
Supply chain best practices refer to strategies processes, and methods that experience has proven to be most effective for managing an organization’s complex network of suppliers manufacturing facilities, warehouses, and vendors to maximize efficiency and profitability.
Adopting supply chain best practices allows companies to
- Streamline operations to reduce expenses
- Improve visibility across the supply chain
- Identify issues earlier and respond quicker
- Deliver higher customer satisfaction
- Gain competitive advantages in the marketplace
Some examples of supply chain best practices include:
- Implementing supply chain technology solutions
- Applying Lean principles to eliminate waste
- Establishing supplier quality management
- Utilizing demand forecasting to plan inventory
- Developing contingencies for supply chain disruptions
Why Do Supply Chain Best Practices Matter?
With suppliers, production facilities, distribution centers, and retailers forming a vast interconnected network, an organization’s supply chain is complex and prone to inefficiencies if not actively managed.
Implementing supply chain best practices matters for several reasons:
Mitigate Supply Chain Risks – Proactive risk management avoids disruptions that jeopardize orders, increase costs, and impact customer service.
Improve Visibility – Enhanced transparency into inventory, orders, shipments, and more enables smarter decision making.
Build Resilience – Greater flexibility to supply chain disruptions protects operations and sales.
Reduce Expenses – Eliminating non-value added activities cuts unnecessary costs at every link in the supply chain.
Deliver Faster – Streamlined processes allow companies to fulfill customer orders more rapidly.
Enhance Customer Satisfaction – On-time, accurate deliveries and minimal stock-outs improves brand loyalty.
Remain Competitive – An efficient supply chain provides advantages over rivals in price, quality, and service.
8 Supply Chain Best Practices
Now let’s explore some of the top supply chain best practices organizations should look to implement:
1. Establish Clear Objectives
Defining specific supply chain goals and objectives aligns strategy, operations, and business priorities. These may include:
- Improving delivery speed by X%
- Reducing supply chain costs by Y%
- Increasing supply chain visibility
- Mitigating supplier risk
With quantifiable objectives, teams can monitor performance and focus efforts accordingly.
2. Implement Supply Chain Technology
Supply chain software provides the data visibility and analytical capabilities to maximize efficiency. Examples include:
- ERP – Integrates planning, inventory, purchasing, manufacturing
- WMS – Automates warehouse workflow management
- TMS – Optimizes transportation and delivery logistics
- SCM – Connects suppliers, facilities, distribution centers
- SRM – Manages supplier lifecycle and relationships
3. Source Suppliers Strategically
A rigorous supplier selection process evaluates suppliers on both qualitative and quantitative criteria, including:
- Pricing and payment terms
- Quality and capability
- Responsiveness and flexibility
- Technology and continuous improvement
- Risk profile and financial viability
This ensures the supply base aligns with operational needs.
4. Build Healthy Supplier Relationships
Strategic partnerships with suppliers foster collaboration and continuous improvement. Best practices include:
- Regular communication and feedback loops
- Incentives for performance and innovations
- Co-creating solutions to improve operations
- Developing suppliers’ capabilities where needed
5. Optimize Inventory Management
Aligning inventory planning with demand forecasts minimizes excess stock or shortages while lowering carrying costs. Lean inventory management approaches include:
- Just-in-time (JIT) inventory
- Drop shipping
- Safety stock optimization
- Inventory turnover monitoring
6. Plan for Supply Chain Disruptions
Proactively identifying potential supply chain risks allows the creation of contingency plans to avoid disruptions. Examples include:
- Sourcing from multiple suppliers
- Increasing safety stock for critical components
- Mapping alternative distribution plans
- Implementing business continuity measures
7. Consider Sustainability
Sustainable supply chain practices encompass:
- Choosing suppliers and partners with strong ESG (environmental, social, governance) practices
- Measuring and minimizing carbon footprint across the supply chain
- Using sustainable packaging materials
- Eliminating waste through circular economy principles
8. Improve Demand Forecasting
Accurately forecasting customer demand helps efficiently plan inventory, production, and logistics. Best practices for demand forecasting include:
- Leveraging historical sales data and trends
- Incorporating external drivers like seasonality and marketing campaigns
- Regularly reviewing and updating forecasts
- Using predictive analytics and AI where applicable
Implementing Supply Chain Best Practices
Here are some tips for effectively implementing supply chain best practices across your organization:
- Get executive buy-in and support
- Involve cross-functional teams in planning
- Provide change management and training
- Start with a pilot before organization-wide rollout
- Set quantifiable targets and milestones
- Measure results regularly and course correct
- Continuously re-evaluate and improve processes
From sourcing and manufacturing to inventory management and delivery, every component of the supply chain must be strategically optimized. Following supply chain best practices allows organizations to reduce costs, enhance customer service, and gain competitive advantage. Companies must actively identify opportunities for improvement, leverage technology, collaborate with supply chain partners, and implement robust processes in order to achieve supply chain excellence.
Supplier alliances and supplier management
Supplier alliances and supplier management processes are key to ensuring that strategies and cost reduction initiatives work well. Efficient supply chain management can be achieved only throughâ¯collaborative partnerships and creating a win-win strategyâ¯for the company and the supplier. If the supplier feels they are being consistently forced to drop their prices, they will constantly be on the lookout for better paying competitors and will drop lower paying customers quickly based on the demand.
Supplier management strategies must be based on enhancing business, financial and process objectives. Performance incentives, a focus on improving price matching and achieving price accuracy and prompt payment schedule is also vital in this process. Â
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Supply chain leaders must understand that while long-standing supply relationships can create value, disruption of such relationships can have devastating impacts and need to be managed effectively. Companies must do a risk assessment at the beginning of every major supply chain project. A formal risk management process must be documented and implemented to identify, prioritize, and mitigate supply chain risks looking at the future.
This process must cover various events that could be catastrophic to supplier relationships and the supply chain. Trade wars, tariff adjustments, weather patterns or shipping disruption like the one we are facing currently all can have a negative impact on supplier relationships.
Known and identifiable risks in distribution, fluctuation in demand, non-compliance of regulatory processes all can be identified, measured, managed, quantified in order to take proactive action to mitigate such risks.
Sustainable supply chains have become a necessity as customers become increasingly conscious about CO2 footprints and the environment. Extensive research done by NYU Sternâs Center for Sustainable U.S. consumersâ purchases consumer packaged goods (CPG) found that 50% of CPG growth from 2013 to 2018 came from sustainability-marketed products indicating that customers are migrating more towards sustainable products. Digital supply chain platforms can assist companies in reducing their carbon footprint.
Supply chain relationships could also fail due to a lack of best practices and discipline in payment processes both upstream and downstream. The order-to-pay process or procure-to-pay process needs to be automated as it covers all steps of the supply chain from order placement to final payment. This covers various departments, including finance, sales, warehousing, and logistics, all of which could be working in silos using various systems to run their operations.
A unifiedâ¯digital supply chain platformâ¯can simplify the entire process, from supplier management, order placement, delivery, and final payment. This ultimately improves visibility across the entire supply chain, providing key insights into payment processes and efficiency.
Many companies still manage their supply chain operations using archaic technologies like spreadsheets and ERP extensions which do not provide the required solutions. Different parts of the supply chain often use different standalone systems and manual processes which could create costly errors in a fast-moving business environment.
A successful and efficient supply chain must have access to real-time information and detailedâ¯supply chain analyticsâ¯to ensure that supply chain managers are able to formulate data-driven strategies and take data-driven decisions where required. Digital supply chain platforms provideâ¯comprehensive supply chain management solutions that integrate automation and predictive analytics, capable of handling all aspects of the supply chain.
Supply chain and its management have become vital for many companies success, and its importance is being seen as a competitive advantage and differentiator throughout companies. The best practices described herein provide a solid starting point for supply chain managers looking to enhanceâ¯customer satisfactionâ¯through effective supply chain management.
The use of technology is vital in turning these best practices into reality, setting the company on a path of successful supply chain management and achieving high customer satisfaction; enabling long-term success and growth.
Supply chain managers are constantly looking to find new and innovative ways to manage supply chains and find opportunities for improvement and solving issues. Digital supply chain platforms can bring data and functionality together giving supply chain managers a real-time view of the current state of their supply chain, predicting any future problems leading to enhanced collaboration, planning and execution.
If youâre operating with spreadsheets and disparate sources of data, learn more about how a digital platform can provide you with supply chain visibility in this
If youâd like to learn more about how to leverage your ERP with a supply chain platform, check out our
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Talent identification and retention
Supply chains have become highly globalised and have evolved to handle the full spectrum of activities from sourcing to production planning to delivery and service. While they are evolving consistently thanks to modern technology, supply chain leaders are finding it difficult to source the right talent for the job.
Hiring specific talent required to handle the requirements of the modern supply chain may require a specialist recruitment company that focuses on supply chains. Many of these specialist supply chain recruitment companies work with universities, colleges, and other professional bodies in supply chain to create a pipeline to ensure a steady flow of students, interns, and entry-level workers to supply the industry requirements.
While hiring in supply chain is a challenge, talent retention is another area where some of the best practices must be followed. Some of these best practices include investment in training for new and existing staff as well as providing a measurable roadmap towards career development.
Organisational alignment is key to the successful operation of a company and its supply chain. Organisational alignment happens when all departments understand the goals of the business and work collectively to achieve that goal. Many supply chains have been operating in silos, leading to ineffective communication, gaps in data flow and unreliable process outcomes. Cross-training, and cross-department execution is critical in aligning the company to achieve an efficient supply chain.
Companies need to ensure all supply chain processes are standardised and evaluated on their strengths and weaknesses. It is also imperative that all business units collaborate, coordinate and orchestrate their tasks. Once the processes are implemented, the impact of these changes must be audited regularly to ensure all practices are aligned.
Strategy is important in any supply chain operation, and this begins with identifying and defining the needs and opportunities in the operation to create a plan based on the available resources. These resources range from people, processes, and technologies within the company. The mission of the supply chain operation must be aligned at a corporate level, as success can only be met when there is a full adoption of these practices by supply chain leaders. Â
The strategy should include simplification, refinement and standardization of sourced products and services. Eliminating redundancy, process improvement and tracking cost savings from sourcing is also key.
Once the above strategies are in place, they must be monitored for performance. Supply chains should be flexible, agile and resilient when responding to market changes and local requirements while ensuring changes in costs are consistently monitored. Performance metrics or key performance indicators (KPIs) should be linked to strategic objectives and standard operating procedures relating to the supply chain. KPIs allow companies to identify and analyze the strengths and weaknesses of their supply chains to address inefficiencies based on data-driven insights.
Depending on the type of supply chain operation, these KPIs may include supply chain cycle time, order rate, inventory-to-sales ratio, logistics costs which enable the company to monitor the ratio of error-free orders, available inventory, total cost of ownership (TCO), speed of replenishment and the total cycle time from order placement to delivery.
Cost management and TCO incorporates all costs associated with various operations within the supply chain from sourcing, production, storage, distribution, and financial and trade costs. Understanding the impact of inventory carrying costs, returns, logistics and distribution costs, order management costs, special deliveries, and payment cycles (both receivable and payable) will bring clarity and possible cost savings to the operation.
TCO allows supply chain managers to make informed decisions about all supply chain nodes and other departments which form supply chain strategies.
Supply Chain Management In 6 Minutes | What Is Supply Chain Management? | Simplilearn
What are supply chain best practices?
Supply chain best practices ensure goods and services reach consumers using the means and methods readily available in the workplace environment. It often requires a collaborative work environment between employers and employees to ensure success.
How do you create a good supply chain management strategy?
1. Establish clear objectives Start by setting clear objectives. By factoring in the requirements of different stakeholders – including shareholders, employees, suppliers, customers, and the wider community – companies can create clear and realistic objectives for their overall supply chain management strategies.
How do best practices improve supply chain decision making?
Five best practices can sustainably improve supply chain decision making across the full coordination process (exhibit). To do so, the design of the corresponding optimization tools and processes must address all decision layers—from strategic orientation to operational execution.
What makes a good supply chain management system?
Effective supply chain management requires the right people, making the right decisions based on the right data and framework. However, mitigating the risks and overcoming the numerous hurdles that appear in these complex supply networks is no small feat.
