Supply Chain Policy

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The term supply chain policy refers to a company's guiding principles that govern how customers are served and how the firm's logistics operations are managed. Some examples follow:

  • Minimum order size
  • Item order quantity multiples / formats
  • Free freight for large orders
  • No questions asked returns policy
  • No order is too small
  • Items designated as non-stocks or direct shipments or direct store deliveries
  • Hours of service and operating schedules

Internal supply chain policies significantly influence the effectiveness of a logistics operation and can negatively impact the bottom line. For many firms, the decisions regarding supply chain policy evolved over the years with little or no thought given to their impacts on service levels or financial costs.

KOM International works with companies to review all aspects of supply chain policy. The benefits of the program are:

  • To ensure that service level objectives are an accurate reflection of customer service requirements
  • To ensure that additional costs are not incurred because all customers are serviced with the same service level objectives
  • To ensure that service level objectives are being satisfied without incurring unnecessary costs
  • To evaluate the cost benefits of changing previously adhered to policies
  • To optimize which items are inventoried and how they are shipped

Through KOM International's services, many companies have lowered their cost of distribution and concurrently improved service levels by eliminating outdated operations decisions that were put in place when business goals and objectives were different. Companies seeking market share growth will implement supply chain policies that are vastly different than companies seeking to reduce costs to restore financial health. Companies that over-service customers may be incurring significant expenses without providing true benefits to key customers. A business review of supply chain policy is an important means to achieving the most effective service levels at the lowest possible cost.