Businesses act as a large ecosystem. They are composed of several smaller elements that work together to create a whole. The backbone of this system is the process of Supply Chain Management, the handling of the production flow responsible for every step of the process, from manufacturing a product to customer experience and profitability.
Every company works by creating a network of supplies known as “links” that move the product all the way from supplying the raw materials to the retailers that sell directly to customers.
But how exactly do Supply Chains work? What do you need to know about them before starting your own business? And what are the aspects you should have in mind when you consider improving this network?
Let’s discover the answers to these pressing questions about the process of Supply Chain Management.
Traditionally there are five main components of Supply Chain Management, namely:
- Planning and managing the resources needed to manage customer demand. It’s important to determine whether or not the supply chain you have in use works efficiently and manages to deliver value and meet company standards.
- Choosing the suppliers that provide the goods or services necessary to create a product is a critical aspect of the management of your supply chain. These include ordering materials, managing inventory and authorizing payments. The administration of optimal supplier relationships is just as important and ensures the well-functioning of the business.
- This part of the process includes receiving raw materials, testing for quality, overseeing the choice of package materials and scheduling for delivery, on top of the actions and work necessary to manufacture the product.
- Optimal delivery is the cornerstone of a good supply chain. Customers expect to see the products they want to buy on the shelves as quickly as possible and ensuring that you can keep up with their demands can boost your business reputation.
Returning or Reverse Logistics
- Creating an optimal network that can take back defective or unwanted products and excess items.
The Key Features
As a general rule, the more efficient a company’s Supply Chain is, the better its chances to survive in the market and create a strong reputation among its specific market niche. One of the aspects that helps any system work as optimally as possible is automation.
Becoming cyber-aware and employing the latest tech developments in your business helps you stay ahead of your competitors and ensure your company works well.
When you use technology in your Supply Chain, you’re protected against hackers and intruders who might try to get access to the vulnerable data you store. This should be an enterprise-wide concern, as your entire enterprise should be guarded against potential intrusions. Moreover, you ensure that your employees don’t have to spend extra time sifting through tasks that could be easily solved via computational power.
One of the most important aspects is the EHS process, the health and safety management system that helps companies manage environmental risks and safety hazards. Using an EHS app software allows your employees to take charge. The workers can conduct their observations, perform individual inspections and complete corrective actions as they see fit.
These are the actions associated with the mobile app version. In contrast, the web version allows you to record data in real-time and create personalized forms that can detect issues and provide solutions optimally. It also means that you can build an audit trail quickly and painlessly.
Some other important features of a well-run Supply Chain include connectivity, such as the one achieved through IoT, B2B and ERP solutions, as well as collaborative efforts. Cloud-based tools are used with increasing frequency due to their ability to enable communication among different commerce networks, suppliers and enterprises.
Scaling analytics with real data is vital to provide comprehensive insights, and anything falling short of this will likely cause you to lose ground in front of your competitors.
The Different Models
As with all areas of business, there’s more than one type of Supply Chain. The one you choose for your business depends on your brand’s constraints, goals and long-term aims. Some of the models include:
- Emphasizing quick product turnover, this type is particularly well-suited for items with a short life cycle. This method can be the right one for you. If you’re looking to capitalize on a trend, then ensure that the goods are completely sold before the trend ends so you can move on to the next thing in due time.
- This system works best for companies in competing industries that are working with rather small profit margins. Correctly utilizing equipment and machinery allows you to process orders more efficiently.
- If your company is impacted by seasonality, the flexible model is the best option for you. Depending on the time of the season, you may encounter higher or lower volume requirements. A flexible model allows you to shift production levels as you need.
Continuous Flow Model
- This is perhaps the most traditional supply chain method. As such, it is most fitting for businesses that have been around for a while and have passed both the emerging startup phase and the growth stage and established themselves in their area of expertise. This is because the continuous flow model is based on the fact that customer demand levels will remain consistent, with only minute variations, and as such, the same products will be manufactured again and again.
- If there’s not one single model that suits your business’s particular requirements, the best thing to do is to create a personalized model instead of trying to make your company fit in somehow. This is typically the case if you operate in a highly specialized industry niche.
- The ideal option for companies dealing with unpredictable demands or made-to-order items. If your brand has very specific supply and demand needs that must be met accordingly, the agile model is the best option.
It can be difficult running an optimal Supply Chain. There are many things you need to take into account, and finding the perfect recipe can sometimes be challenging. But don’t let that deter you.
Managing the process of Supply Chain Management well can make or break your business, so you should take no shortcuts.