Optimize Production Costs by Conducting a Supply Chain Analysis
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Optimize Production Costs by Conducting a Supply Chain Analysis

Imagine you’re sitting inside a luxury car with fully-electric features, a minimalist design, sporty performance figures, lavender mist, and a high-end sound system, comfortable right? 

Now imagine all of that but without wheels.

Is the car functional? Not at all.

But that is what a great product is without an efficient supply chain. Non-functional. 

The quality of your supply chain can make or break your products’ profitability. So, it is worth doing your due diligence to constantly evaluate whether your supply chain is operating at its most efficient. 

What is supply chain analysis and why does it matter?  

As we outlined, a product that has been well designed and optimized for materials, complexity, and tooling is only a fraction of the lowering product costs equation. The “how” you manufacture and transport your products is equally as important.

As a business, every stage of your supply chain: sourcing of raw materials, supply process, manufacturing process, distribution, retail location, and delivery to the customer can be optimized in some capacity. 

The supply chain analysis aims to determine the elements of your supply chain that can be altered to create your product faster and at a more economical price without compromising on quality. In this way, the analysis helps determine how flexible your business can be by reducing inventories, improving forecasts, minimizing risks, and increasing efficiency. 

Optimizing these elements of your supply chain will help to develop and deliver your product faster, better, and cheaper, increasing your brand’s growth rate.

But a supply chain analysis doesn’t just help you with the cost-efficiency of your business. It can also help with:

  • Gaining a competitive advantage
  • Identifying areas that can be automated
  • Breaking through silos and bringing transparency into the process 
  • Increasing customer satisfaction

All in all, supply chain analysis is the foundation for evaluating opportunities to improve and optimize your supply chain.

How do you conduct a thorough Supply Chain Analysis for SMBs and Fortune 5000s?

The short answer: there isn’t one fixed playbook to follow that guarantees optimization. Every business’ supply chain is unique and will face unique challenges. Having said that, there are standardized approaches to how you tackle supply chain analysis.

We break the process of evaluating your supply chain into three separate analyses.

Strategic Analysis: This analysis involves looking at the long-term, big-picture elements of your product’s supply chain.

Thought starters for discussion: 

  • Should your company have a single supplier or multiple?
  • How does your decision affect your product’s cost efficiency? 
  • Is the location of the chosen manufacturing plant ideal? What factors do you consider?
  • Should you go with a more sustainable supplier and incur higher costs? 
  • What’s more important, lowering costs or addressing the environmental, social, and governance (ESG) criteria of your product? 

The strategic analysis aims to evaluate that all parts of your supply chain are working together seamlessly. 

Tactical Analysis: This analysis dives into the details of your supply chain network and its entities. You’ll be analyzing how your brand makes high-quality products at the lowest cost. 

Thought starters for discussion:

  • Is your business sourcing raw materials at the best price?
  • Does the location of your warehouse and distribution center add to or reduce the overall production costs? 
  • Is your business getting the best deal for your logistics and freight forwarding?
  • What are your purchasing strategies? 
  • Which distribution channels are profitable?

In this way, the tactical analysis is about controlling costs and minimizing risks. 

Operational Analysis: This is where you’ll evaluate how the tactical elements previously outlined are implemented on a day-to-day basis. It’s the execution processes of your supply chain.

Thought starters for discussion:

  • How do we monitor logistics for our raw materials to reach production on time?
  • How do we best maintain our inventory levels?
  • What is the best way to coordinate the resources required to produce the product faster? 
  • How do we ensure a quality product and on-time delivery at an economical price? 

The operational level ensures the various departments of your supply chain are in sync and optimized at their most granular levels.

Though we’ve charted all of the stages of analysis for you to follow, there’s still no easy answer for supply chain optimization. 

However, here are somebest practices for supply chain optimization.

Blueprint your process  – Map out your supply chain from start to end with all the entities that comprise it (suppliers, vendors, warehousing, logistics, fulfillment). Create a blueprint of every interaction between entities and understand how each influences the other. Use this to look for optimization opportunities.  

Communication is essential – An inefficiency in one element of your supply chain can have a ripple effect on the entire process. Always be in touch with your suppliers, manufacturers, logistics partners, and retailers to maintain transparency and streamline workflows.  

Automate where you can – Utilizing supply chain management software and applications will help introduce more scalable solutions into your supply chain. Automating processes via these solutions will also help reduce the possibility of human-made errors. 

Befriend analytics tools – Utilize supply chain tools to help you understand what your customers want, when they want it, and make optimized decisions in terms of inventory management and logistical issues.

Partners make it easy – every Batman needs a Robin! While you focus on building a great product, let a supply chain expert do the heavy lifting of analyzing your supply chain. A supply chain expert provides additional checks and controls to ensure your brand is not overlooking any optimization opportunities. 

If you’re interested in finding experts that can conduct a thorough analysis of your supply chain – explore Gembah’s network of vetted supply chain experts. 

Get started here.