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What is efficiency in the supply chain and how to improve it

Boxes stacked in a warehouse.

Turnaround time, logistics costs, and managing external forces can impact the delivery of products and customer experience. And the best way to reduce risks and monitor quality assurance is through efficient supply chain management.

Incidentally, one of the most crucial supply chain metrics is efficiency.

But contrary to what many may think, this metric isn’t only about fulfilling customer demands.

Keep reading to learn more about efficient supply chain management and how your business can achieve it.

What is supply chain management?

Supply chain management is the process that overlooks the entire production flow of goods and services.

Its main stages are:

  • Procurement of raw materials.
  • Transformation of these materials.
  • Product transportation and distribution. 

Supply chain managers do more than oversee production and inventory management.

They’re responsible for:

  • Implementing supply chain management systems.
  • Going through the materials costs throughout the supply chain.
  • Finding the highest-value contracts from direct suppliers.
  • Facilitating returns over different shipping routes.

What is supply chain efficiency?

Supply chain efficiency refers to how optimized the supply chain is.

Efficient supply chain management minimizes resource and time wastage, enabling businesses to reduce supply chain costs and maximize profits.

Supply chain managers play a vital role in this process. They oversee the entire fulfillment network, balancing inventory costs and factoring other expenses, such as shipping costs, into overall profits.

How to measure supply chain efficiency

Every decision on raw materials, production costs, and logistical solutions impacts supply chain efficiency. Businesses must be familiar with the right metrics for supply chain optimization. 

Cost, quality, and time are all critical parts of efficiency – tracking these supply chain performance metrics means you can analyze key strengths and weaknesses in your supply chain.

As a result, you’ll be better prepared to develop projections, averages, and other key efficiency indicators.

Key types of supply chain performance metrics

On your way to efficient supply chain management, you’ll want to pay special attention to two essential performance metrics: cost and quality.


Cost-efficiency measures the efficiency of supply chain operations in terms of costs associated with activities such as order processing and inventory management.

It helps managers understand how much it costs to move goods from one stage of the chain to another.


Quality-related metrics measure the quality of goods at each stage of the supply chain.

This helps managers identify any problems that may arise further down the line.

Supply chain efficiency vs effectiveness

What’s the difference between supply chain efficiency and supply chain effectiveness?

Supply chain efficiency refers to how resources are used and moved through the supply chain.

In turn, supply chain effectiveness refers to how these processes help you achieve specific results or goals. 

Essentially, efficiency refers to internal measures, while effectiveness refers to external results.

Ways to improve supply chain efficiency

Running an efficient supply chain is essential for a successful business.

Today, companies must adjust quickly and effectively to a changing market while reducing costs and improving efficiency without sacrificing quality.

Let’s explore various ways to improve supply chain efficiency through efficient supply chain management.

Expand your supply chain visibility

Expanding your visibility helps supply chain managers oversee every level of the supply chain.

But this can get tedious and resource-heavy. That’s why many use inventory management software to automate processes and get real-time data about the items moving in and out of warehouses and logistics centers.

Use tracking to streamline sales and operations

Sales and operations departments are closely interlinked, yet they are entirely separate.

As a result, vital information is sometimes not transmitted quickly enough to make financially sound decisions. 

For example, say Sales knows that product A sells worse on certain months of the year, but they didn’t inform Operations. Operations may order the same amount of stock during these weaker months, resulting in these items taking up more space. 

Automatically tracking items (and their sales) and centralizing data in a single dashboard are quick and easy solutions to this age-old problem.

With RFID and barcode technology, you can:

  • Effectively track the movements of your products.
  • Automatically inform all relevant departments of inventory levels.
  • Make smarter decisions concerning demand forecasting and sales.

Develop a good relationship with your suppliers

Maintaining good business relationships with suppliers is essential to efficient supply chain management.

By building rapport with your suppliers, your business can secure a steady stream of raw materials for your product line.

Moreover, you’ll be on top of all potential problems (i.e., delays because of natural disasters or a change in quality).

Automate your supply chain processes

To manage a successful modern business, you need to automate where you can while working in the confines of your budget.

For example, your warehouse can benefit from an automated tracking system that sends order information to relevant departments in your supply chain.

This could decrease expected human error and simplify the process of getting items ready for delivery. 

In short, if you can sidestep manual intervention at several points in your production cycle, you’ll save lots of time and resources.

Implement supply chain software

Automating time-consuming tasks helps ensure efficient supply chain management throughout the entire operation.

However, it is more complex than picking a program randomly and purchasing a business license. Managers and decision-makers must first determine if it’s even the right fit for their business.

There’s software designed for every step of the production cycle, from CRM programs for supply chain companies to warehouse management systems.

Choose the software based on your pain points and operational plans.

Run cleaner on the cloud

Efficiency isn’t the end-all for business, especially as consumers become more conscious of the companies they purchase from.

Sustainability has become one of the most significant consumer considerations when purchasing, so hosting power-hungry hardware in your warehouse can hugely impact your carbon footprint.

That’s why many companies have started opting for cloud-hosted software, which:

  • Removes the financial and environmental costs of purchasing, storing, and maintaining infrastructure.
  • Is a solution designed for sustainability.

Standardize output with smart contracts

While many people think of NFTs when they hear the word “blockchain,” many other features of this technology can help businesses.

For instance, smart contracts can help standardize many business-relevant outputs like:

  • Ledger entries.
  • Payment confirmations.
  • Alerts for issues during the production cycle. 

The one trade-off is that these smart contracts require a pretty elaborate setup, but you can always hire developers who specialize in that.

Cultivate supply chain experts

An operation is only as good as its employees, so cultivating standout individuals as experts can elevate your production cycle’s overall quality. 

For example, suppose you have a team member who constantly goes above and beyond and demonstrates a deep understanding of your organization.

In this instance, consider developing their skills to manage different departments instead of working on the floor.

Likewise, training existing managers on updated operating procedures ensures that everything is up to standard.

Business owners must also open channels for employee feedback to see how they can improve the training process.

Optimize your supply chain regularly to remain efficient

Optimization isn’t a goal – it’s an ongoing process. No matter how much a supply chain has been optimized and improved, there is always space to do better.

Sometimes errors in the system arise, or a human error results in a slight course change.

In this inevitable situation, staying on top of things as they come is key to efficient supply chain management.

You can achieve this by:

  • Investing in better technologies, like Method:CRM.
  • Assigning specialists to specific parts of the supply chain workflow.
  • Expanding fulfillment centers when orders pile up. 

Supply chain management efficiency best practices

A supply chain manager can make all the improvements in the world, but maintaining these changes is the difference between wasting time and improving your bottom line.

Here are a few practices that can help you maintain efficient supply chain management:

  1. Plan out inventory management: Using your software of choice, automate essential functions like reorder points, demand forecasting, and stock control.
  2. Use the right software: Inventory management can be challenging, but a capable piece of software can make a huge difference. The right software should help you quickly fulfill orders while providing data on your operation’s weak points.
  3. Facilitate returns: Returns aren’t necessarily a loss – they can be opportunities to work on customer satisfaction while also helping you identify your supplier’s potential issues. To accommodate these returns, ensure a straightforward process for returning and replacing items.

Key takeaways

Ensuring efficient supply chain management can be the difference between simply breaking even and making big profits.

With proper planning and strategy, any business can address its main weaknesses and improve and automate its workflow.

This is especially easy when you have powerful software like Method:CRM.

Automating repetitive actions, data collection, and report development are only a tiny slice of what a capable CRM can do for your business.

Efficient supply chain management FAQs

What is the goal of an efficient supply chain?

The goal of an efficient supply chain is to maximize profits while ensuring all resources (monetary and otherwise) are utilized to their full extent. 

What’s an example of an efficient supply chain?

Amazon is an excellent example of what an efficient supply chain looks like. Despite the number of products processed daily, it can fulfill customer orders in two days or less. Its network includes various suppliers, Amazon-affiliated fulfillment centers, and logistical staff to keep things moving.

How can supply chain efficiency be improved?

Supply chain efficiency can be improved by training staff, automating key functions, and implementing supply chain-oriented software for quick and easy management.

See how to perfect your manufacturing automation here.

Image credit: Ihsan Adityawarman via Pexels

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