Many novice supply chain managers make the mistake of prioritizing speed and quantity over quality logistics. However, this will result in detrimental effects in the long run for their supply chain. Following the three tips below will improve supply chain quality over quantity.
Effectively Manage Minimum Order Requirement Levels
Minimum Order Requirements (MOQs) are essential tools that supply chain managers use to continually balance their stock levels. MOQ levels specify the minimum material amount that can be ordered. Calculating these levels is an ongoing, complex process because the supplier must coordinate their production schedules while also maintaining low internal inventory levels. However, if the buyer’s product demand suddenly drops, then the MOQs will result in excessive inventory levels. This is because warehouse management systems (WMS) automatically send suppliers orders when inventory levels drop. Therefore, the supply chain manager should regularly compare product demand to current MOQ levels in order to avoid this problem. Fortunately, their WMS will be able to provide them with detailed, customized reports that contain the necessary information.
Continuous Supply Chain Improvement
In order to improve supply chain quality, managers should have continuous improvement goals. Supply chains involve interactive chaotic factors such as changing schedules, production delays and revised customer requests. Ideally, supply chain professionals will be able to successfully juggle these different problems. Therefore, supply chain professionals must utilize risk analysis and management techniques to continually prepare for common supply chain problems, such as port strikes, customs delays lost or damaged shipments. They must also distinguish between low and high risk stock items and supply chain routes and take extra precautions accordingly. For example, containers schedule to be shipped across the Pacific are often “rolled” to the next available cargo ship because of overbooking. Additionally, supply chain professionals should also scrutinize their suppliers and regularly review their performance quality. Otherwise, suppliers could continually be late or send the wrong shipments without any consequences.
Improve Material Ordering Flexibility
One of the most common material planning practices involves ordering material through a projected schedule of future requirements. This is often referred to as a release that authorizes production for deliveries that will occur in the upcoming weeks. In fact, longer time frames required to build and deliver products means that more material needs to be released for production. However, if the end-user demand abruptly drops, the manufacturer may be left with excess inventory with nowhere to go. One potential method of eliminating this supply quality problem is to negotiate for flexible lead times. However, this is not an easy task because these lead times are usually not an important focus area for the supplier and they will naturally resist changing their schedules. In order to reduce this problem, supply chain professionals can develop standard lead time charts that are categorized by product and indicate target time frames.
In summary, supply chain managers can increase the quality of their supply chain through managing MOQ’s, continuous improvements and material order flexibility.