7 Smart Policy Changes That Greatly Improve Supply Chain Operations
Supply chain optimization has become a priority for many organizations in the wake of widespread disruptions. Many discussions focus on new technologies and massive, disruptive
changes to revolutionize supply chains – but even small adjustments can make a difference.
While policy may not get the same amount of press, it’s just as important to supply chain optimization as technological transformation. Here are seven smart policy changes to greatly improve supply chain operations.
Requiring Visibility From Supply Chain Partners
Supply chain transparency is essential if organizations hope to become more resilient, yet most businesses lack it. Just 6% of companies report full visibility into their supply chains, and this is
largely due to their complex nature. If organizations want more transparent supply chains, they must maximize visibility from all partners and third parties, not just look internally.
If a supplier, logistics provider, or other partners can’t offer real-time visibility, they limit overall transparency. Supply chains must hold these businesses to higher standards to gain more insight into their operations. It’s also important to remember that this goes both ways.
Organizations must also share more with their partners. Enabling this level of transparency requires real-time technologies like the internet of things (IoT) and efficient communication channels. That will likely involve some initial disruption, but a cooperative movement from all involved parties will make it easier.
Narrowing Data’s Scope
One seemingly counterintuitive policy change many supply chains need to make is to narrow the scope of their data analytics. While organizations should gather and analyze data concerning demand signals and internal operations, many collect too much. Not all information is relevant or helpful, and when businesses try to analyze too much, it often slows or muddies the results.
Consensus demand forecasting typically takes four to five weeks to deliver results, by which time the data may be outdated. Supply chain organizations should instead focus on what’s most relevant to their specific needs. Narrowing data collection to focus on four or five data sets based on relevant KPIs will help deliver faster, more reliable analytics.
Narrowing the scope of data initiatives also reduces related costs and implementation-related disruptions. This restrained approach to digital transformation will consequently deliver a faster ROI.
Segmenting Strategies for Different Products
Similarly, supply chains should segment their strategies to meet the needs of various products. Many organizations struggle to balance efficiency and flexibility, partly because each strategy suits different products. Instead of grouping everything into a singular approach, supply chains should vary their policies to meet disparate needs.
High-value, low-volume products with high demand volatility are better suited to a more responsive supply chain strategy. These items benefit more from larger inventories and distributed sourcing to make adjustments easier. In contrast, high-volume, low-volatility products work better in a lean environment to maximize efficiency.
A 2021 survey revealed that 42% of supply chain managers are too lean, but 49% disagree. This divide arises because different strategies fit different product types. Consequently, supply chains should avoid applying a single method to all of their operations.
Implementing New Technologies Gradually
Just as supply chains should narrow the scope of their data, they should take a more gradual approach to technology. While technologies like IoT tracking and automation can yield substantial benefits, they’re often expensive and disruptive to implement. Supply chains can make the most of them by applying them slowly.
The key is to start with the areas that can yield the most significant improvements. Apply robotics to the most inefficient, repetitive workflows and IoT maintenance to the most common truck issues first. Starting with the weakest areas will produce faster ROIs, helping companies afford further improvements down the line.
Many tech articles and industry publications generate urgency around tech adoption, but supply chains should avoid that. While applying these technologies across the entire supply chain should be a long-term goal, doing so all at once is unsustainable.
Supply chains should also move away from single dependencies. Diversification among suppliers, logistics providers, and other parties will help ensure resiliency across the supply chain. While this goes against long-held lean principles, recent disruptions prove how fragile these networks can be without diversification.
Reshoring and near-shoring should play a central role in these diversification policies. Even as COVID-related restrictions fade, 84% of supply chain organizations report delays in cross-border transportation. If supply chains can source materials or products closer to their destination, these obstacles are less concerning.
Diversification will take time. Like with technology, supply chains should approach this strategy slowly to maximize benefits while minimizing disruption.
Tackling Substance Abuse
Policy changes around the workforce often go overlooked, but they’re essential to supply chain optimization. One of the most pressing employee policy issues in this industry is substance
abuse. More than 20 million people in America struggle with addiction, costing the economy $400 billion annually.
Substance abuse is more common in jobs with long hours, high stress, and repetitive work, like many in supply chains. Employers should address these issues to improve worker health, attendance, and productivity.
In-cab breathalyzers can lock ignitions unless drivers pass a sobriety test, helping supply chains tackle substance abuse on the job. Warehouses and other facilities should also provide resources to help workers struggling with addiction, such as posting helplines or helping pay for wellness programs.
Catering to Worker Needs and Wants
Along similar lines, supply chains should focus on fostering a positive, engaged workforce. The nation faces a substantial labor shortage, with 11.3 million open jobs and fewer workers to fill those positions. Supply chain organizations must emphasize hiring and retention strategies to mitigate this challenge and remain productive.
Many workers leaving their roles do so because recent events have highlighted their unideal working conditions. If companies can listen to what the workforce needs and wants, then cater to those demands, then they can attract and retain more employees.
These policies may involve pay increases, better benefits, more flexible schedules, or career advancement opportunities. It’s also important to ensure workers know their employers value their voice. Businesses should create a system for workers to voice their concerns and address common suggestions.
Simple Policy Changes Can Make a Considerable Difference
Policy changes don’t have to be extreme to produce considerable improvements in the long run. If more supply chains make these adjustments, the industry will become more efficient, resilient, and profitable.
These seven changes are far from the only strategies supply chains can implement, but they’re an excellent starting point. Organizations should see how they can apply these in their
operations, then continue looking for opportunities to improve.