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The goal of an efficient supply chain is to save money and maximize profits by Supply chain efficiency is a business’s ability to use resources, technology, and expertise in optimizing the processes and stages in the supply chain.

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

Supply chain efficiency is defined as the internal standard of performance of an organization, while supply chain effectiveness is the external standard of performance.

In other words, supply chain effectiveness focuses on meeting the demands of groups outside your organization; and supply chain efficiency refers to meeting those demands as quickly and cost-effectively.

Supply Chain Responsiveness

Supply chain responsiveness refers to the ability to react quickly to sudden changes in the environment that affect your logistics processes.

Examples include the ability to scale up when the COVID-19 pandemic hit (i.e., meeting demand for more than double the amount of typical online orders when lockdowns went into place), or getting inventory shipped quickly during the period of time when some of the busiest ports in the world were completely overloaded with container ship congestion.

Components of a responsive supply chain

What separates out typical supply chains from responsive supply chains? While you could argue that luck is often on the side of responsive supply chains, there’s a lot more that goes into it behind the scenes, from diversifying suppliers and carriers, to implementing connected technology that enables real-time tracking across the supply chain.

Flexibility is at the core of a responsive supply chain, which is not just reacting to changes but being proactive as well.

The objectives of a responsive supply chain include:

• Meeting customer demand (delivering on time and at the expected cost)
• Being able to scale up or down when demand forecasting goes awry
• Managing costs during volatile times
• Continuously improving processes and workflows to fit the current needs and situation
• Reducing risk through diversification, planning, and by establishing the right partnerships

There are several key stakeholders (and often third-parties) involved in ensuring a responsive supply chain runs smoothly, including:

• Your company leaders
• Your manufacturers and suppliers
• Your fulfillment center(s) and third-party logistics partner
• Your technology providers
• Your shipping carriers
• Your customers

All of these stakeholders must be responsive communicators, with communication going both ways.

Efficient vs responsive supply chain

Supply chain efficiency is focused on doing more with less, where supply chain responsiveness is focused on agility and keeping business afloat when things don’t go according to plan. But really, supply chain efficiency and supply chain responsiveness work together by managing continuous chaos, as supply chains are some of the most volatile and delicate things in business.

At the end of the day, it’s not about having an efficient vs. responsive supply chain but a cohesive supply chain that can move quickly and adapt without losing money. Efficient and responsive supply chains have common metics to monitor, like on-time fulfillment, profit margins, shipping speeds, lead times, and more.

How to improve supply chain efficiency in 7 steps

Whether you’ve just started your ecommerce business, or it’s already well-established, improving supply chain efficiency can seem like a monumental task. If you don’t know where to start, here are seven steps towards greater supply chain efficiency:

Step 1: Expand your supply chain visibility

The first step in improving supply chain efficiency is to increase your visibility over logistics operations.

Step 2: Develop a good relationship with your suppliers

Communication with your suppliers is key! When you have a good relationship with your suppliers, you can plan better and avoid any shortages, delays, or issues early on.

Step 3: Automate your supply chain processes

Finding ways to automate supply chain processes is one of the best ways to improve efficiency, reduce human error, increase supply chain performance and velocity, and save time and money in the long run.

Step 4: Implement supply chain software

With so many processes taking place simultaneously across your supply chain, it’s important to use implement the right software and technology that allows your team to work as efficiently as possible.

Step 5: Cultivate supply chain experts