Tips for building a profitable supply chain

  • Written by Peter Needle
  • Published on 3 April 2018
  • Our Voice

The term “supply chain” can be quite far reaching – it starts with the process of harvesting raw materials and goes all the way to a finished product arriving at a consumer’s home. 

The strategic importance of the supply chain cannot be underestimated but the supply chain can be easier to tame than many people think. We’ve gathered some of our top tips for maximising supply chain profitability.

1.   Third party selection

One particularly key part of the supply chain that is often overlooked is its suppliers. The suppliers you choose can have a huge effect on the quality of your products, lead times, levels of effective communication and the ethics of your supply chain. Whether it’s your manufacturer, delivery service, or materials supplier, you need to choose every third party carefully.

For one retailer, Segura discovered that 80% of their components were being sourced from unapproved suppliers. By not only knowing who is in your supply chain but having had carefully selected each supplier, you retain control, quality and ultimately, profits.

2.   Embrace supply chain digitisation

Despite the concept of “digitisation” being far from new, a surprising number of businesses still aren’t embracing it. The Hackett Group found that whilst 94% of supply chain managers claim that digital transformation will fundamentally change supply chains in 2018, only 44% have a strategy ready.

By using track and trace technology to monitor your upstream supply chain, you can gain a 360° view. Knowing exactly what’s going on in your supply chain means you identify areas of improvement – as well as where money can be saved. Also, for companies who use manufacturer rebate, tracking the supply chain can mean claiming millions of pounds of uncollected rebate.

3.   Use analytics tools

Analytics tools allow businesses to gain “big data” – large amounts of information from across multiple sources which when combined, give a view of the big picture. Despite 97% of supply chain executives understanding the benefits that big data can bring to their business, only 17% have implemented analytics in a minimum of one of their supply chain functions.

In business terms, big data analytics could be the difference between sinking and swimming. Analytics provide information which, if acted upon, can gain competitive advantage. For some businesses, utilising analytics tools could result in a potential increase of their operating margins by 60%.

4.   Mitigate legal risks

Legal risks that occur within the supply chain can be huge, both operationally and financially. This can be further complicated by the fact that companies who operate and source globally are affected by the rules and regulations of all countries located in their supply chain, not only the country where the business is based.

Being aware of the legal considerations in each relevant country and actively working towards compliance, reduces the risk of any legal issues occurring. For example, whilst some of the most popular sourcing countries have vague or lax regulations regarding health and safety and human rights, the UK does not. Any company operating within the UK is required to comply with the Modern Slavery Act 2015 and failure to do so could result in an unlimited fine.

Although there are many elements to creating a successful and profitable supply chain, there are many steps that can be taken to simplify the process. If you’d like to know more about how Segura could help to improve the profitability of your supply chain, get in touch.

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