What Can Manufacturers Learn from Their Supply Chain Management?

What Can Manufacturers Learn from Their Supply Chain Management

The supply chain is the engine that drives the majority of businesses, factories, and retailers, and it has been front and center recently. Changes in customer needs and raw material availability make inventory stability nearly impossible. But that doesn’t mean companies can’t take certain measures to reduce disruptions. From transparent global inventory management, aftermarket services, and strategically controlling cost, maintaining a viable supply chain for customers is within reach.

When the supply chain works, it’s like a ghost apparatus working behind the scenes—never mentioned by news outlets of everyday consumers. But when it’s not working the way it should, you never hear the end of it – and no one wants their company to be the poster child for supply chain problems. Statistically speaking, the number one cause of global supply chain disruptions is mergers and acquisitions at 66%. In the U.S., the number one cause is unplanned IT outages at 68%.

Start with transparent inventory

Finding the best way to get better visibility can be complicated. Warehousing inventory can eat up a business’ budget—sometimes costing 20-30% of its value. If suppliers are slow to fulfill orders for purchased goods, keeping safety stock on hand is not only an option, but a necessity.

Stock is often held in warehouses that span states and continents. Whether the stock is part of spare parts inventory or ready to ship products, understanding where it fits in the supply chain is key. When extreme economic conditions cause global shipping to be drastically reduced, fulfilling orders of everything from office supplies to residential furniture, becomes near impossible. When companies are accustomed to having global stock availability, many local options are overlooked.

A  McKinsey report highlights the importance of establishing a list of critical components, determining the origin of supply, and identifying alternative sources. Many issues caused by disruption can be avoided with appropriate global inventory management software. Performing these task manually can be daunting and fraught with risk. Employing a software solution can help create a dynamic repository for all of your SKUs. And software avoids manual manipulation of data drastically reducing human error while increasing confidence in your output; this is an important consideration in any aftermarket service space.

Maximize aftermarket service

Another McKinsey study found that the after sales service market is an untapped pipeline. The category includes maintenance, repairs, spare parts, and other services after the initial sale of a product. Aftermarket lifetime value can be very profitable no matter the industry. McKinsey reports that across 30 industries, the average earnings-before-interest-and-taxes (EBIT) margin for aftermarket services was 25%, compared to only 10% for new equipment.

Finding ways to maximize profits from aftermarket service can be a key indicator of success. Customer demand is always changing, and consumers now want more from businesses. They want a service level agreement (SLA) that includes proactive service to ensure their products don’t fail. With more products connected digitally, providing aftermarket services can give manufacturers and businesses another way to meet consumer needs and build loyalty. Maximizing this business unit, is an opportunity to grow your business beyond the point of the initial sale and build additional revenue streams.

Control costs and increase profits

Crises can change consumer demands in ways that are both known and unknown. For instance, during hurricane season, construction manufacturers can predict the impact on consumers and plan to produce more raw materials needed for clean-up and reconstructions. But some disasters can’t be planned for and particular products that will be needed may be harder to access. The best way to take control of inventory and strategically control costs is by centralizing and automating global inventory management to meet demand.

Working with sales and operations to assess realistic customer demand is key but using software to develop demand-forecast strategy based on market intelligence and aftermarket service is another key component of controlling cost. Remaining agile and quickly adjusting to new trends ensures that optimizing inventory management can become a reality. Major stock issues can’t always be avoided but controlling costs by ensuring customer demand can be met quickly is the most important way to make sure that customers want a long-term relationship with a business, therefore increasing profits.

Meet demand for the future

A unified approach that relies on the best tools like inventory management software that includes aftermarket services and analytics, can set businesses up for success in the best- and worst-case scenarios. Software systems that combine AI, analytics, and strategic policies allow business managers to track inventory levels across locations, markets, and dealers.

Many simple processes like forecasting and planning for unforeseen situations can seem overwhelming for many, but with software, can become more approachable. Software solutions can change inventory optimization configuration to replay simulations to see what effects any change would have on inventory.

With this information, inventory managers are equipped to predict the impact of future strategic decisions. Moving forward, the best way to plan for the future is to look at what went wrong in the past. Interested in how you can create a supply chain you can trust? Learn more about Syncron Inventory.