Did you know that the device you’re using right now to read this has traveled across the globe to reach you? Your device, like many other products you own, has gone through a complex process to be delivered to you. This process is called a supply chain. If you don’t know what the elements of a supply chain are, read on.
Running a business can be challenging, but not if you do your homework. The supply chain is one of the finer aspects of a business. It consists of everything between the production of a product and its delivery to the consumer. But this complex process can be narrowed down to four main elements — planning, sourcing, manufacturing, and distribution.
Planning consists of determining what kind of product or service a company needs to manufacture, how it will be produced, and how it will be distributed. In a nutshell, it’s the blueprint of a project. Planning involves setting goals and objectives, analyzing customer demand, evaluating resources, and setting production and distribution schedules. If you want to start a new venture, it all begins with planning.
Everything else that comes after will be based on this phase. It also involves setting up an inventory system, managing costs, developing a pricing strategy, and much more.
The next phase of the supply chain is sourcing. This step is all about finding suppliers and negotiating contracts. Once you enter the market, you’ll realize that you have several sourcing options to choose from, the main three being outsourcing, insourcing, and near-sourcing. Knowing what each entails can help you make a better decision on how to proceed.
The sourcing phase involves researching potential suppliers, assessing their capabilities, and evaluating their cost-effectiveness. Here’s where you would have to put your finest research skills to use. It also involves negotiating terms and conditions, such as pricing, quality requirements, delivery schedules, and payment terms.
Manufacturing includes designing, planning, and controlling the production process. It’s basically the production phase — transforming raw materials into goods through the use of labor, tools, and machines. It also involves setting up quality control systems, monitoring production, and ensuring that products meet customer requirements.
Distribution is all about delivering the products to the customers. It involves setting up an efficient distribution network, managing inventory, and delivering products quickly. Since the whole point of the supply chain is getting goods to customers on time, this is where the process concludes.
It also involves managing returns — an entrepreneur’s nightmare! — and customer service. Every business under the sun has to go through a supply chain, whether they provide goods or services. A smooth supply chain means good business.
By managing these four supply chain elements effectively, businesses can increase profits and customer satisfaction. For a thriving business venture, it’s crucial to understand the functions of each element and how they interact with one another. Another thing to keep in mind is supply chain compliance. It includes everything that relates to employee labor laws, environmental concerns, and hazardous material handling. Therefore, with a solid supply chain compliance policy, you can become a hot company to partner with. Especially, as everyone will know that you follow the best practices.
The supply chain is a crucial aspect of running a business and one you must familiarize yourself with to ensure smooth sailing. With a proper understanding of the supply chain, companies can ensure that their products and services reach customers in a timely, safe, and cost-effective manner.