The term ‘supply chain’ is constantly thrown around by professionals in the business world, specifically within companies that deal with manufacturing and inventory. But what exactly is a supply chain? And why should you strive to develop and refine your company’s supply chain?
A company’s supply chain is a complex network that connects the suppliers of a given product to consumers, and facilitates the sharing of information to enable involved parties to meet present needs and plan effectively for the future. Every supply chain has three basic functions which form the backbone of this concept, the supply of materials to the manufacturer, the manufacturing process, and the distribution of finished goods through a network of distributors and retailers to a final customer.
However the management of a supply chain is not easy. While it links people involved in different stages of the operation, it cannot force the co-operation of individual parties. Hence, developing strong relationships is imperative. For example, in the relationship between manufacturers and suppliers it is critical to establish a level of trust as the balance of power is often skewed depending on the nature of the transaction. The relationship between suppliers and OEMs (Original Equipment Manufacturer) is also significant as it is known to be tenuous but requires strong collaboration to work.
Source: Good relationships in the workforce are important to having a successful working supply chain
As technology advances and new skills are brought into the workforce, it is crucial for supply chains to adapt accordingly so that they can enhance business processes rather than diminish them in any way. Technology can facilitate date driven decision making, process automation, predictive analytics and more. Optimising your supply chain to fit your business requirements as they change can make it easier to achieve a number of goals including;
- Minimising inventory
- Improving Service Levels
- Better Return On Investment
- Reducing costs across the board
- Boosting product time to market
- Improving flexibility of labour in warehouse work environments
In some cases, it is difficult to identify when your supply chain needs to be revamped. The following are reasons for you to optimise;
- There is limited or no IT integration amongst suppliers across all areas, but particularly in forecasting and demand management
- No evidence of shared quality data and process-based collaboration
- Lack of consistency in core process, like sales and operations planning and reverse logistics
- Heavy reliance on siloed or functional metrics which means only one view of the supply chain’s performance is available
- The product, service and supply chain network is excessively complex
- Manual, siloed workflows where supply chain visibly doesn’t exist, which can result in manual work-around programs and gross margin leakage over time
- When sales and operations planning workflows are completed by hand, they often don’t align with how subcontractors and suppliers work
Source: More and more companies are choosing to optimise their supply chain
Optimising your supply chain means that your company will experience better integration (particularly between manufacturers and suppliers) and coordination of activities, resulting in minimal wastage of inventory as demand changes. This will enhance the flow of goods from the supplier to customers which will ultimately reduce the cost of quality and lessen time-to-market. Overall, there is an improvement in the quality of service to customers.
Here at Horizon, we are passionate about supply chains and their ability to aid a company’s business processes and have been successfully working with businesses to achieve optimised supply chains. We are interested to know what you think the benefits of optimising your supply chain are. Do you think investing time into improving your supply chain is worth the effort?