According to some estimates, procurement costs make up to 60-80% of the production costs for various manufacturers. Suppliers contribute to product innovation as well as help achieve more effective production. Given the high dollar value associated with procurement, various manufacturers focus on improving supplier performance. Having a Logistics and Supply Chain Management Software could be a clever idea as ERP for Logistics Services streamlines supply chain processes.
Manufacturers opt for supplier performance management to measure and analyze suppliers’ work. Aiming at cost-cutting, consistent improvement, and better delivery performance, manufacturers are now contacting certified service providers who could help them streamline each supply chain process let alone managing suppliers.
Large businesses have some ways at their disposal. For instance, Coca-Cola booked bulk vessels for supplies, Walmart chartered ships, whereas Gap switches to airfreights. However, small to medium-sized businesses do not have this many resources at their access. Still, they can seek assistance from supply chain management service providers like Trident Information Systems who deliver unified software and advanced technical resource fusion services tailored according to a business’s requirements.
Procurement professionals must collaborate with professional supply chain management partners to align and strategize to secure supply on time. Strategies might include:
Share Forecasts and Order with Suppliers
For suppliers, many supplies are at peak all the time. The supply issues occur mostly during the festive season when the demand exceeds production unexpectedly leaving sellers deprived of their rightful opportunity. During Durga Puja 2021, businesses in Kolkata who used analytics with a unified software solution like Microsoft Dynamics 365, and forecasted demands made 40% more profit than those who procured according to their instincts.
Manufacturers can use analytics to forecast their requirements and share with the supplier/ suppliers to keep stocks according. It is important to share forecasts to plan for input raw material in advance while coordinating with the operational needs concerning labor and equipment for timely delivery.
Prioritize High Margin, Fast Moving Products
Manufacturers may use historical data and analytics to prioritize Stock keeping Units (SKU). It is essential to ensure the correct product assortment in the store. This way they can fulfil bigger orders with more efficiency and quicker delivery.
A stationary inventory impacts the bottom line, the holding costs, as well as the top line caused by loss of sales opportunities.
Engage with Customers While Planning
Have robust Customer Relationship Management like Microsoft CRM Solution to engage with your customers and understand their requirements, demand patterns, and habits to place orders accordingly with the supplier.
For instance, a laptop supplier could understand a company’s hiring plan and prepare his laptop supplier accordingly. Communicating with your clients is essential as it drives demand forecasts. The supplier works better with visibility and supplies with a clear head.
Understand Supplier Timelines
There is a massive benefit of understanding your supplier’s work process and bottlenecks. Assume your supplier produces two substitutional products A and B. Product 1 takes up to 39 days (about 1 and a half months) of production while product B takes up to 20 days (about 3 weeks) of production. It is better to place an order on behalf of product B instead of product A to boost shelf availability.
Utilize Economies of Scale
Placing assorted orders can induce wastage and confusion on the producer’s end, as well as it also increases the production time. Instead, it is better to focus on the high-end SKUs and let the supplier maximize their production. Track inventory in real-time and analyze your requirements. Stock visibility leads to better inventory organization and sorted order placements.
This is the best way to ship consignments in Full Container Load (FCL) while reducing the common waiting time in Less Than Container Load (LCL).
Seek Local Sources
Businesses like Benetton and RMP international have decided to switch their headquarters closer to their homes for supply security. Even though it may increase upfront costs but balances onshore and offshore supplies, which is necessary for the supply chain agility. It also cuts lead time and uncertainties involved in long-distance material transfer.
Procurement managers are advised to conduct market assessments to understand the supplier base of other companies using the same or related products to find local sources.
Supply and procurement involve multiple factors impacting overall cost, product quality, delivery duration, etc. large businesses have their ways. However, things do not seem as easy for SMBs. They might want to seek software implementation to help them with analysis and other relevant features. A unified software solution like Microsoft Dynamics 365 is recommended which integrates every aspect of your supply chain and drives robustly accurate analysis of the organization as well as the market. If you are looking for an implementation partner, Trident Information Systems can be the one for you. Contact us for further details.