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Why supply chain analysis is important for your business

Blog By Duncan Khoury – 27 August 2021

Supply chain management can play a critical role in the success of your business. It directly impacts your customer experience and financial performance, while also providing opportunities to build a competitive advantage. And as part of managing your supply chain, ongoing analysis is crucial.

Supply chain analysis can help you identify issues and opportunities with your current operations. Whatever your supply chain model, these issues are often linked to timing differences in managing supply and demand. 

We take a look at the importance of supply chain analysis, the common issues businesses face and what you can do to close any gaps in performance. 

“Supply chain management (SCM) is focused on reducing costs, improving efficiency and meeting demand to gain competitive advantage. It has a direct impact on performance, making SCM analysis crucial to managing a successful, profitable business.”

Physical supply chain issues

The physical supply chain refers to the system of business, people and activities used to move a physical product from one location to another. 

Issues that can arise include:

  • shipping or general transport delays
  • sudden changes in demand
  • stock being held up in customs
  • stock quality problems
  • incorrect items or quantities

Physical supply chain issues have a direct influence on your customer experience. Supply chain analysis will help determine if customer’s expectations are being met. For example:

  • Can you provide the right quality and quantity of products? Customers should be able to buy the variety and amount they require.
  • Are delivery times within expectations? This can help build trust with your customers. 
  • Are your products or services available to customers where and when they need them? Ensure customers have the support they need to make a purchase when they are ready. 
  • If your customers have any issues, can they be resolved quickly? How are returns managed and can you organise repairs or replacements in a timely manner?

Financial supply chain issues

The financial supply chain refers to the monetary transactions that occur between trading partners around the supply of goods and services. 

Common issues that can arise include:

  • increased overhead costs
  • logistics costs
  • funding gaps
  • lost sales due to late or incorrect deliveries

Financial supply chain issues have a direct impact on your financial position. They influence cash flow, profit margins and your ability to take advantage of new opportunities. Areas to consider include:

  • Can you consolidate suppliers to reduce overheads? Having multiple suppliers helps spread risk, while too many can add unnecessary costs. 
  • How can you reduce shipping and transportation costs? Consider bulk purchases, collaboration with other shippers or automating the information exchange. 
  • Is there room to trim inventory costs? Can you negotiate better deals or secure discounts by offering early payments? This can also have the added benefit of strengthening supplier relationships. 
  • Can you help address funding gaps with flexible finance options? This can allow you to tap into your receivables and access funds when you need them, ensuring you don’t miss out on opportunities that arise. 

Solutions to explore

Once you’ve identified your key supply chain issues, the next step in your analysis is to evaluate different tactics to improve the process. There’s a number of options you can explore, including:

Contingency planning

When disruptions occur, it can be helpful to have emergency plans in place. By mapping out different solutions beforehand, you can respond quickly and help minimise the impact on your business. 

Strengthening  your weakest links

If your analysis has identified risks with specific suppliers, it might be time to explore alternative arrangements. In addition to evaluating the business itself, it can also be useful to consider macroeconomic conditions (environmental, social, political) when deciding the best backups or alternative suppliers. 

Engaging a logistics expert

Getting the balance right in your supply chain is challenging, especially as your business grows and the dynamics change. A logistics expert understands the complexities and sensitives involved. They can help with shipping and transportation, delivery times, supplier consolidation and more, which ultimately helps you save time and money.

Negotiating early payment discounts

Negotiating early payment discounts are one of the best tactics you can use to strengthen your supply chain. By providing early payments to the right suppliers, you can potentially reduce your costs and need for external funding, as well as strengthen key supplier relationships.

Improving cash flow

A strong cash flow position is a key marker of a healthy balance sheet – and a strong, resilient business. It can also be the most powerful tool you have in creating and protecting your competitive advantage. Flexible finance options such as debtor finance can help you tap into the power of your receivables, providing access to funds when you need them – and the momentum to keep growing your business. 

Adopting the latest tools 

The tools and processes you use to manage inventory can significantly impact both customer experience and business performance. Outdated planning tools can lead to inaccurate data, time lags in decision-making and a lack of visibility across the supply chain. Adopting the right supply chain technology can lead to real-time data, demand-driven analysis and accurate forecasting. 

Managing customer expectations

Even businesses with the most efficient supply chains can encounter issues with customer service. If there is a gap between customer expectations and the service delivered, it might be time to better manage customer expectations. Clear communications about items in stock, product ranges, service delivery times and after-care service can go a long way towards managing expectations and delivering a positive customer experience. This can also avoid unnecessary added pressure on workflow and fulfilment. 

By identifying issues and evaluating solutions, supply chain analysis can help your business proactively manage change. Making adjustments now can help improve efficiency, build resilience and better prepare your business for change. 

Digitising supply chain analysis

Fundamental to almost any supply chain improvement is the streamlining of major underlying financial processes. By consolidating your supply chain processes onto the one integrated platform, you can reduce costs across the supply chain and improve business performance. 

With a digital supply chain platform, you can:

  • access short term funding
  • easily locate trade documents
  • receive transaction notifications
  • pay suppliers securely
  • track each step of the process
  • trade securely within global banking standards

Analysis is the key to competitive advantage

Whether your business sells products or services, has a complex supply chain or a simpler process, the importance of supply chain analysis cannot be underestimated. By identifying issues, you can create new opportunities to improve the overall customer experience, increase profitability and get a step ahead of your competitors.

If you need assistance with supply chain analysis, we can help. Get in touch to learn how. 

 

Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.