- Small changes can make a significant difference to your supply chain
- Working with the right partner can transform your business
4 min read
Growth is a sign that your business is succeeding – but rapid growth and seasonal events can place your business under a lot of pressure. This is particularly true for manufacturers, distributors, retailers and anyone else with a large inventory of physical product. If your business starts to struggle with managing increased orders and inventory, you run the risk of missing orders, losing customers, and reversing your growth.
Optimising your supply chain operations and inventory management could mean the difference between making the most of growth – and losing out. We talked to supply chain optimisation expert Tim Ryley, CEO of MYOB Business Partner Endeavour, about his experiences. He’s helped numerous clients streamline their systems, reduce their costs, improve customer satisfaction and ultimately influence the future success of their businesses.
8 signs your supply chain needs work
1. Sales problems
Are you losing sales because you don’t have stock?
“While some customers will be happy to go on back order, there are plenty of occasions when that’s not possible,” says Tim.
Generally, customers won’t wait around and will end up going elsewhere instead. A small change that can make a significant difference, so be sure to begin recording these lost sales.
Tim explains, “If your customer wants 1000 hammers and you only have 200, you need to record the sales loss – otherwise you’ll base your inventory on that 200, and increase the likelihood of a stock-out again. It ends up being a self-fulfilling prophecy.”
If you know what customers want – not just what you end up selling – you can tweak your ordering, and have more chance of getting the right mix of stock next time. Inventory optimisation systems can help manage the recording and ordering process, so your business isn’t running on gut feelings or guesses, but according to the numbers.
2. Over supply
On the other hand, too much stock is an issue. Some companies choose to deal with growth by increasing their inventory, but this has implications because it:
- ties up resources impacting your free cash flow
- potentially increases storage costs
- increases risk of stock being written off
“Too much stock is often as bad as too little stock,” says Tim. “And there are plenty of ways to manage your inventory so you always just have exactly enough.”
3. Ageing stock
Some businesses run into problems with supply planning when they fail to accurately forecast sales. They’re then left with old and outdated stock, which won’t sell and ends up as a loss. This is particularly true of tech products, which don’t tend to stay current for long. This obsolescence was one of the major factors contributing to the demise of tech retailer Dick Smith.
According to a report from administrator McGrathNicol, Dick Smith’s big growth plans "went unchecked" and large inventory purchases "meant Dick Smith was carrying too much stock that was not saleable and was overvalued."
4. Excessive stock movement
If you have a number of warehouses or locations, shifting stock is inevitable. But if you’re constantly moving product from one place to another, it’s a sign that your supply chain isn’t working effectively.
"If you’re not accurately predicting demand in different centers, paying to move stock around the country just to make a sale can rapidly eat into your profit margin," says Tim.
5. Getting orders wrong
One wrong order isn’t a huge problem, but a large volume of errors can “be disastrous”. Not only do you have to pay to resend the item, but it impacts customer satisfaction. The returned product may also be unsalable and have to be written off, eating into your profits.
And that’s the best-case scenario. Tim warns that “customers will often shrug, buy the correct item from someone else, and you never see them again.”
Getting orders wrong is a sure sign that your supply chain management (SCM) isn’t working – this could mean your staff need training, your software system isn’t recording stock properly, or your warehouse isn’t set up effectively.
6. Production problems
For manufacturing companies, having the right parts on hand is essential. If you’re experiencing production delays because parts aren’t coming through when they should, you need to improve your supply chain management processes. Just In Time (JIT) manufacturing was revolutionary for a reason – having the right parts on hand exactly when you need them keeps the manufacturing ticking over, without incurring expensive storage fees. Look no further than Electric Vehicle manufacturer SEA Electric.
7. Going with your gut
Gut feel can be a good way to make decisions, but it’s not the best way to manage inventory. If you’re guessing or making gut decisions on stock orders, you’re probably not forecasting sales very accurately. Using the right supply chain processes and software can improve how information flows to give you access to accurate, detailed sales data, which in turn helps you order what you need, when you need it.
8. Complaining customers
Every business fields complaints now and then – some more valid than others – but if you’re spending a large part of your day placating angry customers, it's a problem. It goes without saying that supply chain issues affect your stock levels. However poor systems and processes impact your order accuracy, the time it takes customers to receive their products, and your teams ability to share updates on orders in transit. If you’re not getting this right the information to your frontline staff it will impact customer satisfaction and in turn future sales revenue and your ability to retain your clients.
Supply chain optimisation - the basics
Every business will have a range of different supply chain problems. If you’re facing a long list of issues, fixing them can seem daunting. The good news is: change in these areas can usually be solved by investing in the right business management software, along with advice from a supply-chain expert.
Introducing this software can give you a significant edge over competitors, too. A recent McKinsey study found that supply chains in general have very low levels of digitisation: only 43%. The research goes on to suggest that companies who do more will boost earnings each year by as much as 3.2%.
For example, Endeavour helped Ross Roof Group (RRG) revolutionise their supply chain. The result? Better ability to smooth out growing pains and gain efficiencies.
RRG’s Commercial Manager George Khoury explains, “We’ve saved about five days’ work a month on the month-end process, and cut paperwork by around 70%. It saves us a lot of time and effort, eliminating the risk of human error.”
Most supply-chain issues can be solved by focusing on three key areas:
- Reducing errors:
Business management software is designed to give you accurate, up to date information about stock levels and orders, which can make a huge difference to accuracy, and reduce the frequency of errors. But data is only one piece of the puzzle. A good system also lets you connect the dots across your business, from forecasting demand, to timing and tracking orders, to getting the right product to the right person, every time.
- Automating manual tasks:
Automating tasks is the next step – the more operational processes are automated, the less likely it is that orders are missed or incorrect.
- Shortening your delivery cycle:
With the right business management software, you’ll get complete visibility across your business. You’ll be able to analyse past orders and optimise the use of your warehouse space, placing high volume product in the best positions for efficient picking and packing. More effective forecasting, ordering, picking, and packing will naturally help to reduce your delivery cycle.
The right people can help you make the most of your software. A supply-chain optimisation partner can help you implement new software effectively, and identify issues with your physical systems and processes.
Working with the right partner can transform your business, optimising every step of your supply chain so you can take advantage of growth.
- Software Selection
Choosing software to suit your specific business needs can be complicated if you’re not an expert. An MYOB Business Partner will be able to look at your business and recommend a suitable solution, with the functionality and capacity you need.
- Implementation and support
When you’ve selected a system, your partner will be able to support you through implementation – installing software, upgrading systems, and training your staff if needed. A good partner will also be available to provide support as you and your team adjust to the new system.
- Optimising processes
Optimisation doesn’t end with software. You’ll need to identify, record, and automate key processes to maximise efficiency in your supply chain – and your optimisation partner should be able to help with this step too.
- Physical and practical
When you work in supply-chain optimisation for a long time, you develop an eye for issues and solutions. An optimisation expert will be able to use a combination of stock data and expertise to help you make changes that could make a huge difference to your efficiency and accuracy. Changing the layout of your warehouse, for example, so high volume stock is more accessible, can save hours of picking time. Changing the way your team picks and packs can also help – for example, adding a second check in your picking process could help reduce errors.
Growth sounds good, but it’s not always that simple. In order to take advantage of potential business growth, your systems and processes need to be prepared to cope. That’s why optimising your supply chain is such an important step.
Here’s how optimisation can help:
|With a well-designed supply chain, you can increase the volume of sales without needing to increase the size of your team.
||Efficient systems save time, staff costs, storage costs, and generally lead to increased profitability.
|Sales growth||Turnover and storage|
|With the right mix of inventory, a fast, accurate delivery timeline, and satisfied customers, you’ll be able to increase sales.
||Better inventory management increases turnover, avoiding warehousing costs and obsolete products.
|Cash flow||Customer service|
|Better ordering processes mean your cash isn’t sitting in stock, improving your cash flow.||The right stock, a fast delivery cycle, and accurate order processing means satisfied customers and fewer complaints.|
|Staff experience||Compliance and best practice|
|Better processes are better for your people too – by reducing the need for manual data entry and improving accuracy, you’ll improve morale and reduce disputes.||Finally, efficient, visible processes make it easier for you to meet industry standards and compliance requirements.|