We continue publishing the entries dedicated to various aspects of the retail business. This time, we’ll focus on the effective supply chain and portfolio management practices that will help your business to thrive.
The supply chain is an essential part of any business that creates, stores, or sells a product. If the chain isn’t efficient, transparent, and scalable, your business can’t operate at its best.
That’s why it’s so important to keep reassessing and refining your supply chain from all angles. By examining your processes on every level, you can get the most out of your system.
Not sure where to start? Let’s figure it out.
1. Assess the strategic value of your products
The entire point of a supply chain is to move your products from the manufacturing stage through to sales.
If the products aren’t doing what they should for your business, then it might be time to cut them from your portfolio, or make some adjustments to boost their profitability.
This goes beyond the financial value of the product. It’s also about what the product does for your brand. If a product isn’t profitable or boosting your brand, you need to determine how you can change this, or if scrapping it altogether is your best move.
2. Track the full cycle of the profitability of each product
Once you’ve ensured the products in your offering are right for your brand, it’s time to look at the financial side.
Gross Profit (GP) is the starting point for your analysis, looking at cost of the product versus sale price.
The next step is to look at the net margins you make with your product portfolio. You need to take into account operating expenses and marketing and distribution of the product. The overall pricing performance of every product needs to be carefully assessed.
If it takes too much to market the product, you will not see a real profit from it.
3. Examine the service and quality provided to your customer
The following step in analyzing products in your supply chain is to see what value the product provides to the customer.
Have a look at the complaints or queries your customer service department receives to find patterns. You’ll likely see a concentration of conversations around particular products. It may be time to cut these from the portfolio, or improve them to maintain your company’s profit margins.
4. Review your supply chain as a whole
How each product moves through your supply chain is an important part of keeping costs down.
You need to look at the process from beginning to end for each of your products to get a solid overview. Look for any hold-ups or bottlenecks causing delays, as well as any unnecessary steps that make the process take too long. The longer the process takes, the lower your overall profit margins are.
Shifting to a portfolio-based approach instead of an SKU-focused one is inevitable if you want to manage the supply chain sustainably. At this point, it is necessary to emphasize the importance of integrating and aligning supply chain management with the pricing process.
The genuinely effective business results can be achieved only through the combination of effective supply chain and pricing strategies. For example, you are entering the market with a brand new product. To make the supply chain work smoothly, you must price an new entry properly.
In this case, the demand-based price optimization might help. In particular, the AI-powered algorithm, like the one we use at Competera, will compare all product’s credentials using computer vision, tabular data, and natural language processing. The engine will correlate the new entry with the similar products based on the sales history to find the most relevant intersections. Then, the prices, turnover rate, and elasticity of the similar SKU will be evaluated. Eventually, the adjustment to the price level of the current year will be applied and the optimal first price will be recommended.
5. Assess the transparency of the chain
Transparency in a supply chain is a great way to keep operations moving smoothly, and to inspire confidence in your suppliers and customers. It will also help you continuously monitor the efficiency of your system to ensure it’s working properly.
Speaking of the transparency and monitoring of the chain, the importance of high-quality competitive data is worth special mentioning.
You might ask why you need to monitor the market data when dealing with your own chain. Here is the answer: comprehensive competitive data will significantly strengthen your positions while negotiating with the product suppliers. In particular, you’ll always be aware of the other players’ prices and every case of a price decrease by a vendor will become obvious to you.
Besides, the market analytics and insights, similar to the ones Competera offers within the scope of Competitive Data product, you can evaluate the assortment intersections with the other players, identify your true competitors and adjust the portfolio accordingly.
Automating your supply chain will help to create a transparent system that’s more efficient. This is because you’re cutting out some of the possibilities of human error, and there will be logs of all actions taken by the automated solution.
6. Integrate all internal systems into the supply chain
Think of your supply chain as the central hub of your business.
Everything should work towards keeping that chain moving—from buying or manufacturing products, to the sales team sending out marketing messages, and interacting with customers.
If these other systems are actively integrated with your supply chain system, operations will become smoother.
A sales rep will know how many items are in stock and what needs shifting; while the staff packing and shipping orders will know what items are being promoted by marketing.
7. Ensure suppliers and partners have necessary access
There are many moving parts to a supply chain — both internal and external.
If you can allow your external partners access to your system, they can better assist with keeping operations efficient. They don’t need to have full access, but it helps if your shipping company, manufacturer, parts supplier, and other relevant stakeholders have the ability to update information on the system as they go.
8. Stop duplicating information
This comes back to integrating all of your systems.
One of the biggest hold ups in supply chain management, and a real waste of manpower, is manually inputting data from one system to another to keep the workflow going.
For example, accounts may need to enter invoices from suppliers manually, and staff working on stock will manually input the same data to keep the inventory records up to date.
This doubles the workload and halves efficiency.
9. Integrate existing mobile tech
When it comes to optimizing workflow and processes, mobile technology has made a massive difference.
You no longer need to work on paper checklists, entering the data on a computer at a later stage. With the right software in place, data capturing and checking off of lists can be done on laptops, tablets, or smartphones.
By utilizing mobile tech, you can streamline your processes AND your supply chain concurrently. And there's no better way to save time of every stakeholder involved in the process.
10. Ensure your system can scale with you
A major mistake that many businesses make is to create a supply chain system that’s static, or unable to cope with bigger numbers.
It's far better to create a solution that can scale up as your business grows.
Take a close look at your existing system and see if it can scale, and if so, how easily it can. Whether you’re still in the startup phase and working on a business plan template, or you’re already established and want to maximize efficiency, scalability of your supply chain is a key element to long-term success.
Conclusion
Continually refreshing and reshaping your product portfolio is an integral part of making your business profitable. Stagnated business practices, products that don’t add value, or poor management can all cause weak links in your supply chain.
Businesses need to embrace change on an ongoing basis to keep their chain running smoothly and their product offering at its premium both for customers—and the company’s bottom line.
