11 global supply chain management best practice examples for retail

The next step in understanding global supply chain  best practices is exploring specific examples of those best practices. Here are 11 best practice supply chain examples.

A critical supply chain best practice is setting up a supply chain steering committee. The purpose of such a committee is to give direction and align the strategy of the supply chain team with an organisation’s overall strategy and direction.

For the committee to be effective, it should include several specific members, such as the leaders of the supply chain team (typically a chief procurement or supply chain officer) and C-suite executives from the organisation. The steering committee should meet regularly to provide support for the actions and decisions of the supply chain team. Overall, the committee needs to ensure that the organisation is happy and comfortable with supply chain operations. It also needs to remove barriers to success for the supply chain team and troubleshoot any issues that arise because of misalignment between the supply chain and the rest of the business.

Another  supply chain best practice is providing supply chain training. Given the increasingly complex nature of supply chains, people inside and outside of the supply chain team must understand the basic functioning of supply chains and how to ensure optimal operation.

Supply chain training may take many forms. For supply chain team members, specialist training or qualifications are usually required. For the rest of the organisation, different types of briefing and training may be required. For example, the finance team may require some training on specific supplier contract terms to ensure that they’re met, whereas the customer service team may need to understand more about the logistical side of the supply chain to ensure that they satisfy customer expectations.

Nowadays, it is obvious that organisations will require technology to help them manage their workflow; according to Forbes, 50% of companies believe that technological advancements have a strong impact. With the sheer number of different technologies available today, to ensure supply chain management best practice, companies need to not only use technology but also understand how to leverage it to become more efficient and effective. Too often, supply chain teams choose technology and then structure their workflow around it. This is a mistake; instead, supply chain managers need to understand a process and select a technology that makes it simpler.

Managing a supply chain is essentially about managing relationships. For that reason, an important best practice is for supply chain teams to create strong supplier relationships.

A strong supplier relationship can mean different things to different businesses, although some essential elements exist. Strong supplier relationships are more like partnerships as opposed to the supply chain team telling the supplier what it needs and on what terms. Two-way communication is essential, as is working with the supplier long after the deal is signed. The supply chain team needs to treat the supplier with respect and endeavour to negotiate fairly and equitably at all times.

Best practice when it comes to supplier relationships also means that reasonable protocols exist for when things go awry. For example, the supply chain team shouldn’t seek to “punish” a supplier if things go wrong; both parties are committed to continuous improvement and aim to meet the value objectives.

Historically, supply chain managers have been very focused on price. Now, however, supply chain best practice is focusing more broadly on strategic sourcing. Strategic sourcing involves looking at data differently, including at a metric called the total cost of ownership (TCO).

TCO looks at the cost of goods over their entire lifetime (as opposed to the cost of simply acquiring them). For example, TCO may look at factors such as the costs of training, maintenance, warehousing, environmental impact, transport and logistics — and even maintaining or disposing of the product if it isn’t sold.

Considering these metrics can help supply chain managers understand other factors that may be important when selecting suppliers. For example, if the cost of disposing a faulty product is high, a supply chain manager may elect to acquire more expensive, higher-quality goods rather than simply select the least expensive supplier.

Another important best practice supply chain example is creating a strategic sourcing plan. As previously mentioned, strategic sourcing is broader in its approach than simply focusing on price.

Creating a strategic sourcing plan is truly a collaborative process that involves ongoing management so that supplier relationships represent partnerships for the organisation.

To create a strategic sourcing plan, the supply chain team needs to consult with and solicit feedback from multiple stakeholders in the organisation. These stakeholders may include those from quality assurance; finance and operations; customer service; and, potentially, occupational health and safety. Consulting with all these important stakeholders will help them buy into the plan and understand the many factors that must be considered beyond cost. Consultation will also ensure the most streamlined and effective supply chain management processes.

Although supply chain management is about more than just cost, cost savings are a big benefit of effective supply chain management. Without proper contract management, supply chain managers may not be able to realise these cost savings.

Several elements for excelling at contract management exist. First, supply chain managers need to negotiate watertight yet fair terms when they onboard a supplier to ensure that if anything happens, the organisation is covered. Beyond that, supply chain managers need to manage the contract throughout its lifecycle, which means regularly checking to see that terms are adhered to and proactively managing risks associated with not meeting terms.

Exceptional contract management also means being fair and reasonable when extraordinary events do occur and treating the supplier as a business partner.

Fluctuating economic conditions mean that organisations are more cost conscious than ever, which is why inventory optimisation is another supply chain best practice.

Inventory optimisation has many benefits. Essentially, it means that organisations don’t have excess money tied up in products that aren’t selling and that they don’t have to spend money warehousing and storing stock.

Significant costs are associated with holding on to products that aren’t selling. As Investopedia notes, these costs can be up to 30% of the total cost of inventory, especially if held for a significant period. For this reason, supply chain teams need to invest a significant amount of time and effort into properly forecasting and managing their inventory so that they can reduce the carrying costs.

Many risks are involved in managing a supply chain, so an important best practice is to create a risk management plan.

To create a strong risk management plan, the supply chain team needs to survey different factors. First, they must work with internal stakeholders to identify financial, safety and other risks inherent in the supply chain. Second, they must work with their suppliers to understand what their risks are and how these risks may affect the organisation.

For example, if a supplier is suddenly not able to access a part for a critical product, a second option needs to be available.

Beyond this, supply chain teams need to plan for and mitigate other risks, including environmental, economic and political risks.

Sustainability is becoming more and more important to managing supply chains, with Nielsen reporting that nearly 50% of consumers value sustainability enough to consider altering their purchasing habits, and more than 80% of millennials believe that companies need to help the environment.

A focus on the triple bottom line means that a company focuses on its social, environmental and financial impact. This type of approach is increasingly important for the planet but also for corporate marketing initiatives and reputation management.

The final best practice example in this list of supply chain examples is the implementation of agile and just-in-time (JIT) strategies.

An agile approach to supply chain management means that a supply chain team will use a combination of responsiveness, flexibility and overall efficiency to manage the supply chain. Agile management means that the supply chain team will largely be proactive, as opposed to reactive, when managing its supply chain and any issues that may arise. For example, the team may use data to forecast trends in supply fluctuation based on extreme weather events, as opposed to waiting for the events to happen.

Just-in-time management is also a more effective way to manage supply chains, especially products. The just-in-time strategy refers to how companies can acquire (and manufacture) goods based on demand instead of holding excess stock.

For further information on supply chain best practices and examples of real-life supply chains, please see:

• Material Handling & Logistics, “Top 25 Supply Chains of 2020.” Take a look at Material Handling & Logistics’ annual analysis of supply chain leaders.
• Arkieva, “Supply Chain Best Practices from 10 Leading Companies.” Explore supply chain best practices from Amazon, Procter & Gamble and other companies.

Nowadays, it’s obvious that organisations will require technology to help them manage their workflow; according to Forbes, 50% of companies believe that technological advancements have a strong impact on their operations.

With the sheer number of different technologies available today, to ensure supply chain management best practice, companies need to not only use technology but also understand how to leverage it to become more efficient and effective. Too often, supply chain teams choose technology and then structure their workflow around it. This is a mistake; instead, supply chain managers need to understand a process and select a technology that makes it simpler.

Even with the most in-depth descriptions, supply chains can still be challenging to understand. For this reason, supply chain diagrams can provide excellent insight into how supply chains actually work.

To be delivered to consumers, products must go through many stages, all of which supply chain managers need to manage. The diagram provides a general overview of how this process works:

Source: Corporate Finance Institute

Supply chains aren’t always circular. At some points, organisations must manage many distributors or retailers, making logistics more complex. The diagram shows an example of this:

Source: Quality & Quantity

When creating a supply chain, supply chain managers have many best practices and processes to consider. As supply chains become more complex, there will undoubtedly be many more.

Regardless of this, endless possibilities exist for how supply chain managers can manage their supply chains, and the work itself is interesting. As they ponder what the future of supply chains might look like, supply chain managers and their teams can rest assured knowing that their work will continue to contribute substantially to the mechanisations of global business.

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This article was originally published on 26 February 2021.