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5 Ways to Use Supply Chain Management to Increase Your Profits

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Supply chain management is the key to a successful business. Implementing process improvements to your supply chain will make the difference between a successful business and just getting by. However, it can be very easy to get comfortable with your supply chain process, and be resistant to any change. But it’s important to identify any inefficiencies in your process and improve them, to ultimately increase your bottom line.

1. Transactional Analysis

In the data driven world we live in, it’s no surprise that transaction analysis can provide incredibly valuable insights to a company. But it can often be seen as mundane to analyze every single transaction from every customer. However, it’s important to remember that these transactions are direct consumer insights into the demand for your product. And it serves as a great starting point to create strategies to increase Customer Lifetime Value at the individual level. No matter what type of analytics platform you use, it probably provides much more data than you realize. It should include customer transactions, customer demographics, vendor transactions, and sales history. This information is critical when it comes to developing ROI strategies and ultimately, interacting with future customers.

 

2. Rank Customers and Suppliers

Now that we’ve discussed the importance of analyzing sales data, it’s time to put that data to use. Gather the gross profit information from all of your customers and suppliers, and make two separate lists, ranking from most profitable to least. Once the list has been created in ranking order, it will also probably be easier to identify groups or clusters that drive the majority of your sales. This process has a lot of benefits, it will help you make both procurement and sales functions more efficient, and give you more information to identify high quality leads in the future. This will also make it very obvious if you have any customers or suppliers that are just making your process inefficient, and as a result, less profitable than it could be.

 

3. Remember The 80/20 Rule

80% of your profit most likely comes from 20% of your customers. Again, by ranking your customers from the previous step, you should already have an idea of who these customers are. Identifying this group early on can help you narrow down and streamline your sales process and eliminate anything that may be unnecessary. It can also help you define standardized practices within your business such as sales handoffs, qualifying leads, and internal processes to eliminate any discrepancies, and in turn, save you time and money.

 

4. Standardize Your Processes

Speaking of standardizing sales processes, this should get you in the mindset of standardizing internal processes and thinking about the organization as a whole. Where are the bottlenecks of the business? (To learn more about bottlenecks and what to do about them, check out our blog post!) Are there any processes that take an unusual amount of time? Usually, when you are doing an audit of your business to find the inefficiencies, you’ll likely find that they are due to individual personal preferences or emotionally driven decisions. While we cannot ask our employees to become robots and make every decision without individual opinions, we can explain to them how those decisions may have greater losses that affect the entire business. For example, imagine you own a car dealership, and you have a salesman who is absolutely determined to close 1 more sale today, because maybe he’s been having a bad week. However, he spends the majority of the day trying to close the sale with a very headstrong customer, which takes up time and money. Alternatively, he could have been using that same time working on more qualified leads, which would increase the bottom line. This type of decision is easy to be overlooked, but shows how standardized processes can have a great effect on overall profit.

 

5. Consider Cross-Functional Teams

Integrating teams across your organization can be extremely beneficial to your supply chain. It can increase communication between departments and get rid of any misunderstandings or unnecessary complications. This will also help solidify the organization’s overall goal, whether that be to increase sales or increase customer satisfaction, if the entire organization is aware and working towards the same goal in their daily operations, it will cause an overall increase in productivity. Cross-training also helps identify potential areas for other process improvements. A delivery driver sees the entire process of sorting purchase inventory to the delivery to the customer. In their role, they have the best knowledge to make that process more efficient and possibly provide suggestions for inventory management. 

 

If you would like to further discuss how to use supply chain management to increase your profits, contact us for a Free Consultation today!

Written by Dr. Lucas Chesla

Dr. Chesla is a retired United States Marine Corps Officer who faithfully served over 20 years. He is an accomplished Lean Six Sigma Master Black Belt with a robust portfolio of projects from a variety of organizations. Skilled in teaching, project management, coaching, mentoring, strategic planning, team building, conflict management and public speaking. His passions include understanding and interpreting personality profiles and body language.

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