What is a Supply Chain?
Depending on the goods, services, and procurement, the supply chain can get quite elaborate. In general, a supply chain starts at the bottom with the procurement of the raw materials, which includes the labour needed. Next, there is the research and development stage, logistics, e.g. transport and storage, regulatory requirements are then met, the sales and marketing teams do their thing, and the products are sold. Which you may think is the end; however, a few things could come after – depending on your business and the services it provides – such as after sales care, which may be customer service or things like maintenance.
The Importance of Understanding a Supply Chain
Mapping out your supply chain is a critical step in the strategic planning process, and it also helps you to perform an external analysis of the business. In addition, laying out your supply chain in clear terms can help the company define its own market and create goals and plans for the future.
Each level of the supply chain is essentially a different industry, from raw material extraction to manufacturing to selling and so on. Therefore, understanding the supply chain enables a business to gain a better insight into the other factions and organisations that it relies on to do business.
Understanding all the different elements that contribute to your business and, by extension, your profit margin can help you to achieve the best value for money. It can also help you to manage any risks that could impact your business. Lastly, it could also help you to identify any social procurement opportunities.
Supply Chain Management
Supply chain management is an often overlooked area, which is frequently taken for granted. However, supply chains are the backbone of a business regardless of the industry. As mentioned above, it starts with procuring the materials and continues until the goods are in the customer’s hands or even after sometimes. This process relies on several factors, and it involves a range of decisions and transactions between the divisions.
The success of a business relies on the continuity of the supply chain. Businesses have to choose suppliers, transport and potentially storage solutions. Inventory storage and goods-in-process handling are a part of it too. Marketing and distributing often wraps up the process. All of these decisions have to work in conjunction with each other to ensure the smoothest transition between each level. If you want to learn more about supply chain management, then there are lots of resources online, and some companies also offer courses to help you learn more, and you can even gain a certificate from a course in logistics management. Learning more can be incredibly useful, and it can help you progress your business further.
For a supply chain to be effective, it relies on a solid background of decision making. Strategising helps lay a foundation that can benefit the entire supply chain process from the top-down, beginning to end. These decisions are often the first step a business can make towards developing the best process. You should start by ensuring that you understand the product’s lifecycle from beginning to end. Then you can address other important considerations, such as choosing the site that is the best fit for purpose. You should also begin to create your network of reliable contacts, including suppliers, transportation, and logistic handlers. After this, you should start to consider whether or not there are any long-term improvements or innovations needed to better meet the demands of the business. Are there any apps or programmes you can use to streamline the process and make it more effective?
The short-term decisions that a business has to make regarding the supply chain are usually tactical. The strategy level is all about planning, but the processes themselves are defined at a tactical level. These decisions can play an important role in managing costs and controlling risks. Tactical management is usually about achieving the best value for money and focusing on consumer demands. Common concerns are procurement, schedules and ensuring that the best practices are adopted in comparison to your business’s competitors.
Often the operational level is the most obvious; these decisions are more about the day-to-day management of the supply chain. It is all about keeping the supply chain moving. It can often be the biggest area of focus for some businesses who then completely abandon the tactical and strategic levels. However, operational management of the supply chain can have the biggest effect and derail the other aspects. Operational management includes the forecasting of figures to ensure that demand is met, overseeing the production operations, settling any damages or losses, and the management of the incomings and outgoings.
Arguably, to manage a supply chain successfully, you need to take a holistic approach. When all three levels are integrated and managed effectively, the supply chain thrives.
The generic supply chain begins as normal with the sourcing of raw materials. These are then handed over to the logistics provider, then to the supplier who also acts as a wholesaler. These materials are then given to the manufacturer or a variety of manufacturers who process them and refine them into a finished product. After the manufacturers, the products make their way to a distributor who again acts as a wholesaler who passes them on to a retailer. Finally, the retailer takes the finished product and sells it directly to the consumers. When a consumer purchases the product, the supply chain is complete. After this, the cycle continues.
Things are a little different for an e-commerce company. E-commerce companies tend to operate through a website that may sell a vast range of products. When a customer places their order, their product selection is processed using an online system. Next, they pay, and their payment is processed, which then opens up the supply chain. First, the order is sent to a warehouse, and the product is picked and readied for delivery. The warehouse can either be operated in-house or by a third party, depending on the business. Next, the order leaves the warehouse and is passed onto the shipping company, which again can either be in-house or operated by a third party. Finally, the package is shipped to the customer, and that is the end of it. In some cases, the retailer never has the product personally; they act as a middle man to sell the product.
Having a reliable supply chain is essential for your business. A lot of different factors can affect your supply chain, but a proactive approach to supply chain management can often help to head off most of these factors before they become a problem. If this is not something you have previously taken an active role in, you may want to rethink your strategies.