Supply chain networks are crucial for businesses.
They help with logistics, distribution, transportation and storage of goods, making them a core business set for any business. Unfortunately, network designs become obsolete over time, due to changing customer needs resulting in inefficiency and other issues. Read on to find out more about them.
It costs companies more
Network designs exist to maximize the efficiency and effectiveness of a commercial supply chain. If a business does not review them regularly, they can quickly become the carriers of hidden costs. Hidden costs arise due to the inefficiency of a system or, in this case, the supply chain. Take, for example, a company that has warehouses on one side of a city. Five years ago the location was good, but because of a huge complex built three years ago, most of the company’s customers have moved, losing some. Some still buy and the company delivers.
In this example, an apparent hidden fees represents freight charges, which include the cost of fuel to ship the product. Since there are not that many customers, the person will deliver to fewer people while consuming the same amount of fuel as they would if they had delivered more. Next is the cost of the warehouse. The location means it is not efficient. This example shows that good network design can become inefficient over time if a company does not conduct reviews of its system.
It produces erroneous measurements to make a management decision
The goal of the leadership team is to determine how to move the business forward. To do this, they rely on data collected by employees and their supervisors to draw specific conclusions.
If a vendor’s system is faulty or poor, it will affect the metric produced. To get accurate metrics, get supply chain optimization consulting of professionals on how best to help with this problem. Here is an example of supply chain optimization. The management team wants to provide better service to some clients and decides to use the total revenue to help them make their decision. It only tells half the story, and that’s because the metric used is incomplete, making it wrong. A better metric would be cost of service analysis, which will tell the full story of each customer.
It can slow down the business process
The supply chain of any business is the heart, and therefore, if there are any issues with the Supply Chain, there will be problems with the business process. Processes are a series of steps taken to achieve a defined result. Poor network design will make this process obsolete, cumbersome and inefficient. It’s not uncommon to see workers with a lot of idle time or the business out of stock before realizing they need to reorder or make delivery errors. When a business experiences the above scenes too often, it’s time to rethink the network design.
Building and maintaining an efficient supply chain is a great decision. The hardest part is taking the exams. Most management teams hesitate because it takes time and resources to review and make adjustments. Once it’s done, it will be worth it.