Shipping containers

How to optimise your supply chain to improve profitability

The supply chain may not be the most sexy area of business, but for companies that want to improve their bottom line it is often the supply chain that offers the most opportunities for optimisation.

Apple may be best known for its premium electronic devices and matching premium price tags, but their commitment to efficiency in their supply chain is one of the major reasons behind their huge profitability. They generate higher profits per phone than any other manufacturer, and that is largely down to the expertise of the now CEO for former “supply chain guru” Tim Cook. Steve Jobs may have been the visionary behind the company and devices, but it was down to Tim Cook’s decision to make Apple’s supply chain simpler and more agile that has kept the stock price on an upward trajectory for more than a decade.

So how can you optimise your supply chain?

Simpler is better

Getting a product to market is a complicated process and companies often need to source materials from around the globe, which then need to be assembled, packaged, and distributed to customers. As such, the supply chains are often complex beasts, with many moving parts as companies buy up and materials and need to constantly manage their inventory to make sure they never run out but also never have too much in stock. Agility and materials management optimization are critical to keeping costs down whilst maintaining production volumes.

Centralise your data

If you’re managing multiple warehouses for storage and have multiple production lines then keeping on top of inventory across all sites can quickly get out of hand. Make sure that your IT infrastructure is set up with a centralised repository that keeps track on your inventory across all sites in real-time, so you know immediately when you need to re-order any materials or are able to shift the materials around your network to efficiently keep things running smoothly.

Artificial intelligence is here to help

The more data you record about your supply chain, the more helpful artificial intelligence could be in helping you find efficiency savings. Intuition and business nous are great, but AI can let you know about problems before they happen so you can make the changes and avoid interruptions. AI can tell how each part of the supply chain is performing in real-time and help you create a just-in-time production network that leaves you requiring the least amount of warehousing space and the higher production output with few hiccups along the way. As Tim Cook says, “inventory is fundamentally evil” and should be kept to a minimum wherever possible.

Plan changes carefully

The closer you get to just-in-time manufacturing the more important it is that you stay consistent with your inputs, as any changes could mean delays and production slow downs. Change can be good when properly planned and implemented, but if you try and tweak the supply chain too often you may be in for a tough time as the effects slowly filter throughout the network with often unexpected consequences. Be sure to plan and test any scenario thoroughly before putting it into practice to avoid any unforeseen hiccups.

Photograph by Jarosław Bialik