5 Supply Chain Challenges That Automation Can Help Overcome

What are the main challenges that small businesses face in Supply Chain? Of all the activities required to deliver value to your customers, some are tougher than others. In this post, we cover the Supply Chain challenges that can be overcome with simple automation tools that do not require massive investment or lengthy transformations.

1. TRACEABILITY

The first challenge for a growing business in consumer goods is to ensure traceability across the entire supply chain. While it is relatively easy to trace products that are sold as are purchased – packaged goods-, this can be a real pain if you are a manufacturer.

Tracing batches and ensuring consistency of lot numbering and best-before dates throughout the manufacturing process up until the finished goods is a job that can take days if you do not have the right tools.

To lose traceability of your goods means having to recall all the inventory of the items at your expenses. If you trade with large retailers failing to provide a traceability report within a few hours from the initial request, can trigger a product recall and charges that can easily bankrupt a small company.

HOW TO ENSURE TRACEABILITY OF CONSUMER PRODUCTS:

  • Ask your vendors to include the product batch in the paperwork when delivering supplies. When reconciling the goods receipt the batches details can be passed into your database.

  • When running inventory checks and stock counts, validate batches and expiry date together with the quantity of each item. Companies that do not track batches to simplify and speed up the stock takes increase exponentially the risk of losing traceability.

  • Enable the batch tracking in your ERP or warehouse management system if it can be integrated with accounting software.

AUTOMATION TOOLS FOR TRACEABILITY

  • OCR: Optical Character Recognition is a technology that allows data to be captured from common files like PDF. OCR apps can capture batch numbers included in the paperwork sent over from your supplier. With simple integration, the data captured can be passed to your ERP that will fill in the receipt lines with the traceability details.

Here a short list of m favourite OCR solution providers

  • Live data inventory dashboards: Another tool to ensure traceability is dashboards that show inventory data in real-time. This technology requires companies to adopt a perpetual stock count. Her is how it works:

  • Warehouse or Supply Chain users get an alert about performing a stock count on their screen according to the setup. For some companies, this can be as often as multiple times a day or just once a week depending on the speed at which the company replenished the inventory. The application will then show data of a few items to check and ask the users to confirm all the details including batch numbers.

2. COLD CHAIN

Temperature-controlled storage and transportation is also a critical element of the supply chain for Food & Bev and Pharma companies. Having a shipment of chilled or frozen food exposed to heat for too long means losing inventory.

When elements of the Supply Chain are outsourced with different partners operating in different regions, maintaining the cold chain can be challenging.

BEST PRACTICES TO AVOID BREAKING THE COLD CHAIN

  • Select a 3pl or freight forwarder who can provide electronic temperature logs. Even better if the logs are shared online.

  • If your goods are received and store in your premises, ensure that the fridges sensors are regularly checked.

  • Use Supply Chain procedures standards like ISO or BRC

MANAGE COLD CHAIN DATA THROUGH AUTOMATION

  • IoT: Internet of Things is a technology that can connect objects to the net. Small pieces of equipment can be installed on the company trucking fleet and stream temperature data in real-time. When IoT is paired with automated alerts you can get real-time visibility of the cold chain without the need to constantly check data. Users get alerted when and if the temperature goes outside the desired range.

  • Cloud BI: Business intelligence in the cloud allows publishing reports and dashboards and make them available even to users outside the organization. When a dashboard is published it can be opened using any internet browser without the need for specific software and in some cases without a licence. The company that publishes the data can also set up how often the report is refreshed so that users can get the most up-to-date reports

  • Mobile alerts: With a simple app you can get a call or an SMS if the temperature of your fridges go above the set temperature

3. SHELF LIFE

Most small businesses can plan their supplies long ahead, they buy inventory in bulks and can afford to wait weeks before the stock is received. Sometimes though, mother nature does not care about your planning.

Ingredients and finished goods with limited shelf life must be received fast and so they must go, or they will go wasted. This means FMCG companies need speed in their supply chain. Any delay in the receipt, handling and despatch of the goods harms the remaining shelf life of your products. Leaving companies with a high risk of losing inventory.

HOW TO MINIMISE INVENTORY WASTAGE DUE TO LIMITED SHELF LIFE

  • Agree with your suppliers the minimum shelf life that you will accept on the receipt of the goods. Include this data in your planning to calculate the maximum days if the demand to cover when purchasing your goods

  • Agree lead time with your logistics partners and ask to include it in the contract agreements

  • Plan replenishment more often. Food & Bev and Pharma companies should aim to review their planning daily.

  • Avoid bulk buying supplies. Often the savings that can be made on the purchasing price are nullified by the wastage exposure due to the inventory passing its best-before date in the warehouse.

USE AUTOMATION TO AVOID LOSING SALES DUE TO STOCK PASSING THE BEST-BEFORE DATE

  • Alerts with tools like Microsoft Flows that can send alerts based on the inventory remaining shelf life

  • Advanced reporting and data analysis to automate supply planning. Automated planning can be a great asset to companies in the Food & Bev or Pharma industry where shelf life is critical. Although this requires expertise to be designed and set up the quality and the consistency of supply planning done can be far superior compared to traditional methods. Imagine planning your next purchase orders having clear visibility of product quantities, inventory on hand, stock in transit and shelf life without working on huge spreadsheets

  • Report generation and SMTP to automate freight bookings from your core system: One of the simplest yet most effective ways to save time, therefore shelf life in the chain of supply, is to automate the booking of collections and shipments.

4. RETURNS

Returns can stress the Supply Chain capacity of B2C companies in consumer goods. With an e-commerce channel returns and customer service become a critical element of their daily operations. If handled incorrectly, returns can either damage a company reputation or drive costs too high.

Managing returns is not only about customer service. Measuring returns is an opportunity to understand more about your Supply Chain.

HOW TO HANDLE RETURNS MORE EFFICIENTLY

  • Have a return budget. Include the costs of handling returns in your costing. Make it reasonable, total quality is not possible and it is not realistic to expect that all your sales go fine

  • Create a simple but relevant list of reasons for the returns. Start with a simple yet exhaustive list like:

o Product Quality

o Incorrect item/ quantity

o Damaged product/ packaging

o Price

  • Define roles and responsibilities for handling returns in your organization. Companies operating multiple sales channels have different employees handling returns like members of the Supply Chain team for large corporate customers, sales teams for smaller customers and even marketing for e-commerce. Regardless of the individual employees, it must be clear across the company which department oversees managing returns

Create return policies so the employee managing the return has clarity on how to handle the return and even if the return should be accepted or not

AUTOMATION TOOLS THAT HELP MANAGE RETURNS

  • Email automation: Create a dedicated email address for returns and customer service then use email automation to open tickets and forward the email to the relevant team in your company. With a standard MS Office licence and less than 10 hours of work, you can design a workflow that creates a ticket, sends an acknowledgement email, populates a spreadsheet, and creates a task in the team calendar.

  • Core system integration: With an external returns database connected to your core system returns can be linked to customers and even the sale that originates the return. This allows users to get real-time data about profitability as the cost of the return is allocated against the sales

5. LANDED COSTS

Landed cost is an essential way to calculate your company’s profitability by representing the total cost of a product on from the factory floor to your buyer’s door. It includes the price of the goods purchased, shipment costs, insurance fees, customs duties, and any other charges incurred along the way. In Supply Chain management, landed costs are essentially direct cost as opposed to overheads that are costs not associated with products but more about running the department itself.

Having visibility of landed costs allows companies to have visibility of real profit margin per each product or customer

HOW TO CALCULATE LANDED COSTS TO GET TRUE NET MARGIN

Landed costs can be calculated before applied. Let us take a typical scenario of a freight charge: the company has shipped one container of mixed goods and the haulier has charged a fixed fee for the entire container. When calculating the landed cost of the single products best practice is to allocate according to what best applies to your costing methods like by weight, volume, or purchase price

AUTOMATION TOOLS FOR LANDED COSTS

  • OCR: Optical characters recognition is a great tool to automate the posting of landed costs. With some basic setup, details included in the invoices received can be linked to specific purchases or products

  • Cross-references databases: Using a simple database either created in the company’s core system or the cloud users can link suppliers’ codes with the company own SKUs. This enables other automation tools to validate invoices related to landed costs

CONCLUSION

The five supply chain challenges described above are only some of the daily caveats that users face regularly when working in the consumer goods industry.

Automation can help by taking over the tedious and often error-prone elements of a process. The more challenging the process the higher the value that automation brings by eliminating the risk of manual error.