In an efficient supply chain and information system, net sales increase because
By monitoring the efficiency of their supply chains, companies can ensure they are not wasting resources as they produce and deliver goods to customers. This article provides tips on how to measure and improve your supply chain efficiency. Show
Inside This Article
What Is Supply Chain Efficiency?Supply chain efficiency is about how effectively a company gets its products to the right place at the right time and at the lowest possible cost and how well it uses resources to produce and deliver goods. Improving supply chain efficiency is a key part of any business’ overall supply chain management practice. Manufacturing efficiency is separate from supply chain efficiency. You can learn more about ways to make your manufacturing processes more efficient. Key Takeaways
Why Is Efficiency Important in Supply Chain?Supply chain efficiency is important because excellence in this area can save a company money while keeping customers satisfied. An efficient supply chain means shorter order processing times, better inventory management and faster delivery. It also often means higher profits. Supply Chain Efficiency vs. ResponsivenessSupply chain efficiency focuses on delivering quality products to customers at the lowest possible cost by maximizing such resources as materials and labor. Supply chain responsiveness focuses on customers’ expectations and strives to provide a quality product faster. There can be tension between the two goals. For example, at times, higher supply chain efficiency will mean lower supply chain responsiveness. Supply Chain Efficiency vs. Supply Chain EffectivenessSupply chain efficiency describes how well a company uses resources to make and deliver quality goods. Supply chain effectiveness defines how well a company satisfies its customers with those products. Experts consider supply chain efficiency to be an internal standard, while supply chain effectiveness is an external standard that reflects how well the business is meeting the wants and needs of customers. Experts often equate “supply chain effectiveness” with “supply chain efficiency,” but it’s possible for a company to have an efficient supply chain that is not effective. Or, it can have an effective supply chain that is not efficient. The most successful companies strive for a balance. Companies can cause themselves expensive problems when they strive for too much efficiency, as the past several years have shown. A 2014 study, “Reducing the Risk of Supply Chain Disruptions,” found that companies that made their global supply chains very lean could suffer costly disruptions. For example, the study cited how Toyota Motor Corp. incurred billions of dollars in lost sales because of 2010 product recalls. Those recalls were primarily caused by the car company relying on a single part from a single manufacturer. More recently, companies that had embraced just-in-time manufacturing often found themselves caught short. Leaders need a way to continuously monitor the performance of their supply chains and must carefully consider the potential for disruptions when deciding how efficiently they wish to work. Supply Chain Efficiency vs. Effectiveness
How to Measure Supply Chain EfficiencyYou can measure supply chain efficiency through supply chain efficiency metrics. These metrics often focus on the time it takes for a production step to happen, the cost and the final product’s quality. Here are some valuable metrics that measure supply chain efficiency:
For companies that want to get more in-depth on measuring, a publication from the Lulea University of Technology in Sweden, titled “Measurements of Efficiency in a Supply Chain,” details the 12 top supply chain performance metrics that the Supply Chain Council recommends through its Supply Chain Operations Reference, or SCOR. The paper also proposes a new way to measure supply chain efficiency through the Average Logistic Index. The SCOR model provides benchmarking tools that help organizations improve their supply chain processes. What Is the Supply Chain Efficiency Curve?The supply chain efficiency curve measures the cost of your supply chain on one axis and the performance of your supply chain on the other. In general, increased performance means increased costs. Companies with efficient supply chains have an efficiency curve that is flatter than average. Their supply chain performance increases more than their costs do. Anything that falls above the curve is inefficient supply chain operation.Ways to Improve Supply Chain EfficiencyExperts recommend a few ways companies can improve their supply chain efficiency. Those recommendations range from better use of data and automation to building better relationships with suppliers. Here are some top tips to improve supply chain efficiency:
Beyond improving your supply chain efficiency, you can also learn more about best practices in overall supply chain management. NetSuite Enables Companies to Master Their Supply ChainsPracticing supply chain efficiency can help companies save money and use resources appropriately. But that’s only half the equation to have a productive supply chain; it must also be efficient. NetSuite’s Supply Chain Control Tower helps you achieve both an efficient and effective supply chain by balance demand and supply. It also helps you control costs while pleasing your customers. Use the NetSuite solution to analyze demand, forecast sales and automate essential tasks so that you can stay on top of your supply chain. It enables you to save money while keeping your customers happy and winning new ones. How does an efficient supply chain and information system increases the net profit margin of retailers quizlet?How does an efficient supply chain and information system increases the net profit margin of retailers? By increasing gross margin and lowering expenses.
Why is it important to have an efficient supply chain?Consequently, an efficient supply chain helps minimize delays, which is crucial for maintaining financial efficiency and efficacy. It directly improves your bottom line by expediting product delivery and minimizing the cost involved per consumer and adds to your competitive advantage.
Which of the following is a benefit of efficient supply chain and inventory management?Improved product and material flow
Effective supply chain management enables companies to improve product flow through accurate demand and sales forecasting and also improve inventory management to arrest the bullwhip effect and avoid underproduction.
Why is it important to have an efficient supply chain quizlet?Why is it important to have an efficient supply chain? There will be fewer stockouts. Which of the following terms describe a document that which tells the distribution center what is specifically shipped and when it will be delivered?
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