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Supply chain management affects all aspects of your organisation, from manufacturing to consumption, most notably customer happiness and ROI. We’ve put up a primer on supply chains, explaining what they are, why they matter, and how effectively managing them can help reduce business risks and capitalise on opportunities.
What exactly is a supply chain?
A supply chain (SC) is the process of moving goods from production to consumption. It begins with collecting raw materials, proceeds through manufacturing, transportation, and distribution, and concludes with delivering products or services to the client.
What is the importance of supply chains?
On the most basic level, supply chains are crucial because they plan how and when you will get your product into your client’s hands. An adequate supply chain will reduce manufacturing and distribution expenses, allowing you to pass savings on to your consumers while still receiving the items they want in a proper length of time. As a result, supply chain finance must be considered to optimise the supply chain management of working capital and liquidity invested in supply chain activities and transactions. It helps maintain your company competitively and enhances client happiness, which benefits the bottom line.
How do supply chain function?
While the intricacy of the supply chain varies based on the size of the organisation, sector, product market, and other considerations, all companies have the same key five processes.
1. Take into account the provider
Begin with the fundamentals at the beginning of the supply chain. What services does your company provide, and where do you get them? How much of the supply chain is crucial to you? What are the practical constraints? For example, if your firm imports finished items, you don’t need to supervise acquiring raw materials to create those things. However, the availability or otherwise of those commodities will still impact turnover in business; consider dual-sourcing the items to account for supply disruptions, pricing hikes, and shipping concerns.
2. Transportation and logistics
After you’ve established dependable and flexible sourcing and installed procedures that enable you to monitor the market as it evolves, think about how you’ll bring items to market.
3. Conduct an audit
Check the performance of each component of your supply chain. An audit highlights accomplishments and improvement areas. No rigidity is allowed. Your supply chain must be sturdy and adaptable to handle rapid changes.
4. Collaboration agreements
A successful SCM system would digitally integrate supplier communication at each level. However, this is typically a question of people management. Who reacts better to a casual email or a face-to-face meeting? It also allows you to get essential specialist knowledge of each level of the supply chain.
Models and kinds of supply chains
Six main supply chain models are tailored to a particular organisation. These models are based on two unique strategies.
Supply networks that are designed for efficiency
These supply chains prioritise efficiency by concentrating on key performance indicator like low cost, optimal asset use, and total cost of company operation. This strategy is primarily used by commodity producers specialising in, for example, paper, steel, cement, and rapid fashion. This technique has resulted in three supply chain models:
The “efficient” supply chain model focuses on end-to-end efficiency and is often utilised in highly competitive sectors and marketplaces.
The “rapid” supply chain model adds flexibility, making it a strong match for markets that rely on regularly changing goods. The “continuous-flow” supply chain model is a conventional paradigm that works well in high-demand but seldom changeable markets.
Supply chains designed to be responsive
Significant demand unpredictability drives businesses that utilise supply chain models based on this methodology. In such small businesses, using market mediation costs is critical to align changes in demand with changes in production capacity. This method is typically used in the following supply chain models:
The “agile” supply chain concept was intended to accommodate ebbs and flows in demand and is often used for customised or made-to-order items. The “custom-configured” supply chain model — a hybrid of the agile and continuous-flow models that allows for bespoke settings throughout production. The “flexible” supply chain approach prioritises response to the volume of demand in businesses where it changes significantly.
Your method will be determined by your company requirements, industry, management emphasis, internal business procedures, and unique value proposition. All of these models include responsiveness and efficiency features, but they are primarily focused on one of them for scalability.
Supply chain examples
Supply chains proactively handle data management, efficiency, compliance, and product production sustainability segments. As a result, supply chain tactics may differ significantly between sectors, countries, and markets.
The basic supply chain
A simple supply chain organises the movement of commodities between companies and customers by storing and distributing inventories or supplies.
Supply chain in manufacturing
The process starts with the acquisition and exploitation of raw natural resources. These assets are subsequently delivered to the product provider, who serves as the wholesaler. The resources are sent to the manufacturer(s) on demand, refined, and processed into a final product. The goods are picked up by a distributor and delivered to a store. The goods are subsequently sold to the customer or consumer by the store. A cycle is completed after the customer purchases the product. More demand fuels a never-ending loop.
The supply chain for e-commerce
In this case, the system interaction is a website where customers may choose a product and make an order. A payment processor handles the order payment transaction, and the order is received and carried to the buyer’s location by the warehouse. This supply chain bypasses the store by transferring the goods from the distributor to the ultimate customer.
Conclusion
A supply chain is a whole system of making and delivering a product or service, starting with the procurement of raw materials and ending with the delivery of the product or service to end consumers. The supply chain describes all parts of the manufacturing process, such as the actions engaged at each step, transferred information, natural resources converted into useable materials, human resources, and other components that go into the completed product or service.
