Managing your supply chain can feel like directing a play. Just as you need to coordinate all the different elements – from actors to lighting to sound – you also need to juggle the supply of your product components. Just as you need to bring actors on and off stage at the right time, you need to ensure that everything arrives – and ships – on schedule.
When it works, you have a masterpiece to bring to your customers.
But when things go wrong? You may well have a tragedy on your hands. Even in a best-case scenario, you’ll probably have unhappy customers. In a worst-case situation, you may irreparably damage relationships and/or your brand’s reputation. To avoid that happening, you may want to consider implementing one or more supply chain improvement initiatives.
It’s always been essential to make your supply chain as efficient and cost-effective as possible. But now, more than ever, you also need to ensure that it’s stable and reliable.
Supply chain improvement tips
The most significant supply chain improvement initiative you can implement is to ensure you have easy access to working capital. Without it, your entire supply chain could grind to a halt.
Beyond that though, there are four major areas to invest in that should improve your overall supply chain management.
1. Strengthen your relationships
Strengthening relationships with your suppliers, agents and financiers can help you when you run into challenging times. Let’s delve deeper into each type of relationship.
Build rapport with your suppliers
No matter whether your suppliers are local or overseas, it’s worth taking time to build and then maintain a relationship with them. If your supplier starts to face stock issues, they’ll be more upfront with you if you’ve already created a rapport with them. Knowing about the issues early on will then help you to plan or manage any disruptions.
It’s also a good idea to diversify your contacts within your supplier’s organisation. If you’ve only built a rapport with a single person there, and they leave or get sick, you may lose the relationship you have with the entire company.
Employ a local agent
If you use an overseas manufacturer, it might be a good idea to hire an agent ‘on the ground’ in their country, then build a relationship with that agent as well. They can check that the company is doing everything correctly, and carry out quality control firsthand to ensure you’re getting the standards you’re paying for.
While this expense may seem unnecessary, the extra certainty could actually save you money, depending on the scale of the manufacturing relationship. Normally, if there’s a quality issue, you won’t know about it until the goods arrive in Australia – which could be as much as six weeks after they’re sent. Using a local agent to spot-check can save you those weeks by detecting issues before the items leave the country.
Get to know your financiers
Whether you’re using traditional financial institutions like banks or more innovative financiers like Octet, it’s worth putting time and energy into building a relationship with them too. The key to these relationships is trust and transparency, and with a solid relationship underfoot, they may be more likely – and able – to help you if you run into financial disruptions.
2. Diversify your partners
As well as building strong relationships with your existing partners, it’s also important to diversify and create connections with new ones. This applies to both suppliers and financiers.
Disruptions can have a massive impact on your supply chain. So it makes sense to ensure that if you have a problem with one supply partner, you can easily switch to another. Ideally, if you use overseas suppliers, identify two from different countries, plus a local company for backup.
This reduces the risk of disruption to your supply chain if there are supply issues in a particular country. And if the disruption is more widespread and you can’t source your goods from overseas at all, the local supplier can quickly step in (even if they are slightly more expensive overall). As a result, you won’t lose sales. That local supplier can also be a useful backup if demand surges and you need products quickly.
In the same way, spreading your risk across multiple financiers can often make good sense. If you currently use traditional financing only, look at diversifying it with more flexible finance options, like ours.
Octet’s range of products can:
- give you faster access to your receivables funds
- provide access to more capital to fund your growth opportunities
- accelerate your cash flow so you can reinvest it into producing more saleable goods
3. Invest in technology
Supply chain management is a complex beast. Finding ways to use technology to improve your supply chain management efficiency is key.
It pays to invest in streamlining your processes, both internally and externally. One way to do this is by integrating all your supply chain process documentation into one system. Octet’s market-leading supply chain platform lets you move your business towards a paperless system.
Rather than having to send documentation via email or fax, you can upload everything you need, like bills of lading and purchase orders, directly into the platform. The system will automatically notify both parties when the process is complete, and you’ll have a full audit trail of all communication.
Increase payment visibility, safety and speed
Using a supply chain finance platform not only streamlines your system, but it also lowers the risk for all parties and makes you less susceptible to fraud.
This creates a win-win situation. Suppliers have full visibility of payments, so they know they’ll receive their money. Meanwhile, buyers get the confidence of knowing they’re dealing with a verified supplier that’s passed various security checks.
4. Plan for risk
Planning for rare occurrences may seem like a low priority task, but if the current crisis has taught us anything, it’s that absolutely nothing is off the table. Planning makes it more likely that your supply chain will keep going through turmoil.
While we’ve seen both demand buying and supply chain disruption during the COVID-19 pandemic, risk can take many forms. In fact, researchers at The University of Melbourne have classified risk into seven categories.
- Macro: these are large-scale risks, both natural (like disease and weather-related disasters) and man-made (like war and terrorism).
- Demand: this category covers factors like unexpected surges in demand, forecasting errors and incorrect information.
- Manufacturing: disruptions such as strikes and accidents, and poor working conditions are classified as manufacturing risks.
- Supply: risks to supply include factors like having a single supplier or a small supply base, as well as supplier disruption or bankruptcy.
- Information: information risks include IT system breakdowns, delays in information, cyber security hacking and a lack of data transparency.
- Transportation: disruptions in transportation can be from factors like strikes, accidents or government controls.
- Financial: financial risks can include exchange rate fluctuations, as well as changes in wages and the availability of viable external business funding alternatives.
Planning for risks to your supply chain can put you in a better position to weather any disruptions.
Improve your supply chain with Octet’s advanced working capital solutions
Accurately forecasting demand can be challenging right now, and it may well continue to be difficult into the future. However, implementing supply chain management improvement initiatives can help to offset the risk of trying to forecast in uncertain times.
But of course, you can’t manage your supply chain if you can’t fund it. To help, Octet offers a range of finance solutions that may suit your unique circumstances.
Find out more about the best options to keep your supply chain running smoothly.