How to improve supply chain efficiency 

Ah, supply chain efficiency, the holy grail of business management. In an ideal world, we’d all reach maximum efficiency in all of our endeavors, but in reality, this goal is as elusive as the proverbial work-life balance we’re all striving to strike. 

Still, it’s a good goal to have, because supply chain efficiency is the key to streamlining business operations and ensuring timely delivery of goods to your clients. Basically, it’s the secret sauce that can improve agility, inventory management processes, and set the stage for customer satisfaction. But how can you reach this seemingly unattainable goal?

That’s what we’re going to find out by the end of this article.

What is supply chain efficiency?

Supply chain efficiency relates to the ability of a business to make the best of its available resources, technologies, expertise, and skills to deliver goods to its clients in a timely manner, while also minimizing costs and maximizing profits. 

It sounds like an ideal scenario, doesn’t it? The end goal of an efficient supply chain is to satisfy the needs of the customer while maintaining a healthy bottom line — a win-win situation, if you will. 

How can this be achieved? By optimizing existing processes and enabling end-to-end visibility into the entire supply chain. Such a strategy requires delving deep into all processes, from:

• Production
• Distribution
• Delivery
• Cost management
• Time management
• Waste control
• Staff productivity
• And identifying ways of streamlining them. 

A company needs to leverage all available resources and technologies at their disposal to this end, from data analytics and inventory management software, to scheduling and tracking software. It might require some time, effort, and investment, but in the end, an efficient supply chain will lead to increased customer satisfaction, better partnerships with business collaborators, and last but not least, better profit margins.

Supply chain efficiency vs. effectiveness 

You might have heard the terms ‘efficiency’ and ‘effectiveness’ used interchangeably when it comes to the supply chain. However, they mean different things. 

Supply chain efficiency correlates to an internal performance standard within a company, while supply chain effectiveness relates to an external standard, in the specific industry or market.

To make it even more clear, when we say ‘supply chain effectiveness,’ we’re focusing on delivering goods that meet the standards and demands of the market, the clients, and the partners. When we talk of ‘supply chain efficiency,’ we’re looking to meet the demands set within our own company, in an effort to optimize processes and streamline costs. 

Supply chain efficiency vs. responsiveness

Another common debate revolves around the difference between supply chain efficiency and supply chain responsiveness. While ideally, they go hand in hand, they also mean different things. 

A responsive supply chain means that a company is able to react and adapt quickly to changes and unforeseen events that might impact production or distribution processes. Think of the sudden impact of the COVID-19 pandemic on global supply chains, which took everyone by surprise. Companies must be ready to meet higher or lower demand, find alternatives when certain raw materials become unavailable, discard obsolete inventory when necessary, and more.

Basically, a responsive supply chain is prepared for anything, but for this to happen, companies must take the time to plan ahead and have backup strategies for any kind of scenario that might occur unexpectedly. Data analytics and inventory management software can also help predict shifts in consumer behavior or market trends, allowing businesses to prepare for disruptions in the supply chain in a timely manner and avoid issues like stockouts or overstocking. 

On the other hand, an efficient supply chain is all about optimizing processes and getting maximum results at minimum costs. It’s all about agility, cost-effectiveness, and meeting consumer demand while maximizing profits and streamlining operations. While a responsive supply chain is focused on reacting and adapting to unexpected chaos, an efficient supply chain is a constant focus. Of course, the goal is to have both an efficient and a responsive supply chain. An efficient supply chain will respond much better to unexpected shifts in the market, and will enable you to adapt and bounce back quickly from any situation. 

5 steps to improving supply chain efficiency 

It’s clear by now that having an efficient supply chain is key to improving business operations and maximizing your bottom line. But how can you achieve supply chain efficiency and set your business up for success? Here are some steps you can take to get started on the journey towards supply chain efficiency. 

1. Boost your supply chain visibility 

First things first: in order to achieve supply chain efficiency, you need to know everything that goes on in your supply chain, from the first step to the last. Gaining visibility into your supply chain allows you to track your products in real time, from the production process all the way through delivery to the customer. By enabling transparency, you’ll be able to see and manage your inventory levels at all times, pinpoint changes in consumer behavior, spot supply chain trends, identify slow-moving inventory, predict inventory needs depending on shifting market trends or seasonality, and much more.

How exactly can you do this? By integrating inventory management and forecasting software such as Katana to gather real-time data related to your inventory levels, customer satisfaction, delivery lead times, and much more. This will allow you to avoid stockouts, backorders, delays, unsold inventory, and other unwanted things, by leveraging the power of real-time data. 

2. Embrace technology and automation 

Remember when people used to say automation is a threat to humans, and that robots and technology will replace us all in the end? Well, in some cases, that’s not really such a bad thing! 

Achieving supply chain efficiency means streamlining operations and avoiding human error. How can you do this? Well, by embracing automation and allowing technology to take over some repetitive tasks. This will reduce the potential for human error and free up time for your staff while also saving money — what’s not to like? 

Automating some of the processes in your supply chain enables you to improve productivity and accuracy, reducing the chance of errors, delays, and inaccuracies, not to mention potential workplace accidents. Your staff will have more time to focus on higher-level tasks, and you will save money in the long run because you won’t have to hire or replace people in your workforce. 

Things like order processing and management, automated shipping, and returns management can be automated either fully or partially to increase productivity. There might always be the need for human supervision when it comes to automated processes, but these changes will definitely improve both customer and staff satisfaction in the long run. 

3. Build strong relationships with business partners 

This goes without saying, but in order to create an efficient supply chain, you will need to establish strong, professional relationships with your business partners. This includes manufacturers, distributors, wholesalers, and any other entities you choose to or need to collaborate with to deliver goods to your clients. If one of the links in the supply chain fails to work, it will disrupt the entire process, so you need to make sure you have fail-safes and backup plans in place for such situations. 

By carefully selecting the suppliers you work with, you can eliminate issues like delays, stockouts, order management and processing errors, and more, ensuring customer satisfaction. This is why working with professional partners who are consistent in delivering the goods or materials you need is key. You don’t want to focus solely on costs here — the cheapest option might not be the best in this case. 

At the same time, you want your business patterns to also work towards efficiency and responsiveness. This will allow you to respond quickly to changes in the market or raw materials availability without losing customers. One tip here is to try to work with multiple suppliers and distributors, if you can. That way, if something happens and one supplier can’t deliver the goods you need, you can use an alternative supplier and still meet customer demand. 

4. Make sustainability a priority 

In this day and age, sustainability is more than just a ‘nice to have,’ it’s a must-have for any business. Customers are increasingly focused on buying from and working with companies that focus on protecting the environment, and they pay attention to things like sustainable packaging, recycling efforts, and other similar initiatives. 

Using recyclable, biodegradable materials can boost both customer satisfaction and your profit margins, and can help you cut down on packaging costs significantly. Any effort to reduce your carbon footprint, like replacing the filler materials in your packages with biodegradable ones, or shipping products ‘in their own container,’ also called SIOC packaging, can go a long way in building customer loyalty. There’s no real downside to embracing sustainable practices within your supply chain, as it benefits both your cost management, your customers, and the environment — a triple-win situation. 

5. Use a returns management system

Here’s a reality check for you: no matter how good your products are or how excellent your order management processes are, returns are an inevitable part of the game. It’s important to figure out how to best handle the returns process to make sure it doesn’t disrupt operations and impact your supply chain efficiency negatively. 

Implementing a quality returns management system is crucial because it will allow you to keep track of your inventory and return it to a supplier, resell it, recycle it, or discard it, whichever the case may be. A returns management system will enable you to replace or refund products in a timely manner and still maintain customer loyalty and satisfaction. 

Still, returns are never fun, so you can take certain steps to try and minimize the chances of such a scenario:

• Using clear and detailed product descriptions
• Regularly testing and verifying products and their expiration dates
• Offering clear instructions and details on the return process
• And handling that process as swiftly and professionally as possible. 

Win the supply chain efficiency game with Katana

Implementing a quality inventory management system like Katana is your best bet in your quest to achieve supply chain efficiency. By tracking your inventory in real time, you enable full transparency into every part of your supply chain. This allows you to make informed decisions and avoid issues like stockouts, delays, obsolete and unsold inventory, and customer dissatisfaction. 

Katana seamlessly integrates with the best ecommerce platforms available on the market, allowing you to keep accurate track of all your inventory, elevate your order processing and management, forecast inventory demand fluctuations, and much more. 

Get a demo to see Katana in action and discover more features that can help you reach supply chain efficiency!

Ioana Neamt

Contributing Writer

With more than 10 years of copywriting experience, Ioana has a fondness for longform writing, investigative journalism, cats, and Victorian-style mansions.