Do you recall the British smash hit TV quiz show, Weakest Link? It’s comical how entertainment mirrors real life… and business. Believe it or not, identifying the weakest link is not merely entertainment – it is an essential step to grow your business.
Specifically I am referring to the linkages in your supply chain – the process and players involved from getting your products or services from ideation to production and ultimately to consumers. It’s time to get brutally honest about what is working for your business and what’s not.
Every small business has a supply chain in place even if you don’t realize the strategic or tactical implications of it. The chain is comprised of partnerships, people, and information that aid to transform your ideas into tangible outputs that buyers want and need. No matter how simplified or complex your chain is at the end of the day productivity equals profitability. No productivity – no profitability.
5-Steps to Optimize Your Supply Chain
Before you opened your doors, hopefully you planned each step of moving goods and services in and out to customers in an efficient and cost-effective manner. If not, it’s never too late to start.
For example, I regularly deal with manufacturers, suppliers, vendors, brokers, and numerous third-parties that contribute to the flow of goods and services to customers and/or clients. Over the years, I have learned why it is important to continually optimize this process. Removing the weakest links will in fact save you time and headaches in the long run. Here’s a 5-step blueprint to optimizing your chain:
[/check_list] Often, you are forced to revisit one or all of these steps based on a partners performance. For example, we measure our partners on various independent criteria. If they begin to fall short in specific areas such as cost efficiency, quality assurance, lead times, etc then we will go back to the drawing board. Case in point:
I previously dealt with a manufacturer that increased rates without notice and refused to make movement on other contractual terms. Soon after, I cut their budget significantly and strategically moved forward with a new partner. Interestingly enough, they proceeded to send marketing collateral to remind me of their services and ask for more business.
The reality: Companies that are true partners will seek mutual benefit; not simply their own. What is truly better, guaranteed business with nominal increases or no business at all? Now, keep in mind, more often than not rate increases are a byproduct of doing business on an annual basis, however, a company should look to add value in other areas to offset the perceived loss in another.
Changing elements of your supply chain is tough business for some. But keep in mind, a good business relationship is based on productivity not feelings. Generally, it is a last recourse to cut long-term partners because I truly believe that longevity in business relationships lead to success. However, it is almost always necessary to re-evaluate business relationships in order to grow and maintain profitability.
Manage the Chain and Remove the Weak Links
A supply chain generally includes manufacturers, outsourced resources, wholesalers, suppliers, distributors, drop-shippers, retailers and customers. Now that the pieces are set on the board it’s time to ensure that each piece is in play to contribute to the success of winning each day in business. Here’s how to get started:
- Review every resource and step that is dedicated to meeting demand for your business. Then set a measurement of accountability at each stage such as lead time, negotiated rate locks, payment terms and so on. Make sure each piece is working efficiently to deliver the highest quality. Also ensure that you have duplicable processes in place that a fourth grader could grasp. This will help you to scale comfortably from 10 clients or customers to 100.
- Once you have identified the resources “sources” and steps to simplify your chain reward those linkages that are productive by increasing business contracts. The same reciprocal rule applies to non-productive resources – let them go if they don’t perform. If a partner is price gouging, raising rates without notice or inflexible with improvements – say goodbye. But first weight the switching cost. Loyal partners are hard to find so if you’ve got some, look for mutually beneficial ways to grow your businesses together.
- Now let’s work with your mastermind group of business associates, employees or contractors and brainstorm ways to simplify each process. This can include the manufacture and delivery of your goods or services. For example, are you monitoring the production or team output on projects? There may be a more efficient way to handle client requests or manage inventory. Possibly your manufacturer can also package and ship goods at a competitive rate? Or if you are handling calls yourself weigh the time vs. value proposition. Is it better to create a FAQ sheet and outsource a small business call center to handle the volume of calls you receive? Your time is valuable – could you be doing other things to grow your business?
- Develop a standard customer support system and stick to it. Look for ways to empower customers and clients to troubleshoot issues on their own. Set up an online system to track issues and requests. But most importantly, be transparent up-front to preclude high volume returns and or contract revisions.
- Lastly, remove yourself from the process. At some point every entrepreneur should work towards removing themselves from the process and develop a more strategic role of oversight and leadership.
All five steps above deal with the improving standard supply chain steps of planning, sourcing, making, delivering and problem-solving stages. Learn to run lean and mean – then grow your business from the ground up by working smart one step at a time. And remember, no productivity – no profitability.
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