Supply Chain Management- Necessary Concepts Small Business Needs to Know

Supply chain management is a crucial aspect of operations for businesses that deal with physical goods. It involves coordinating the entire process of getting goods from the manufacturer to the consumer in the most efficient and cost-effective manner possible. The success of this process depends on choosing reliable and trustworthy supply chain partners.

However, there are inherent risks associated with managing a supply chain, such as disruptions or delays, that can negatively impact a business. To mitigate these risks, business owners must take proactive steps, such as maintaining open communication with suppliers, diversifying their supply chain partners, and implementing contingency plans.

This article is particularly relevant for retail businesses that need to produce and transport physical goods from one location to another. Understanding the intricacies of supply chain management is critical to ensuring the smooth and timely delivery of goods to customers. By carefully managing their supply chain, businesses can reduce costs, improve efficiency, and ultimately enhance their bottom line.

What is Supply Chain Management- the Buzz Word?

Supply chain management refers to the various activities involved in ensuring that a company’s products are produced, distributed and delivered to customers in the most efficient and effective manner possible. This involves a range of tasks such as sourcing raw materials, manufacturing, warehousing, transportation and delivery, and requires coordination among multiple entities such as suppliers, manufacturers, distributors and retailers.

At the core of supply chain management is the goal of optimizing the flow of goods and information from the beginning to the end of the supply chain, in order to improve operational efficiency, reduce costs, increase customer satisfaction and ultimately enhance the company’s bottom line.

In a typical supply chain, suppliers provide the raw materials or components that are needed for production, which is then assembled by manufacturers into finished products. These products are then distributed to retailers or directly to consumers, who ultimately determine the demand for the products.

Effective supply chain management involves not only ensuring that the physical products are moving smoothly through the chain, but also that the relevant information is being shared effectively between partners, in order to enable timely decision-making and improve the overall efficiency of the process.

“Without a strategy, supply chain and transportation run the risk of becoming cost centers that can negatively impact a brand.”

• Andrew Lynch, president of Zipline Logistics

What Do You Need to See When Choosing a Supply Chain Management Partner for your Business?

Choosing the right supply chain partners is essential for a business’s success, as a single company cannot handle every aspect of the supply chain on its own. It’s important to consider several factors when selecting partners, such as their ability to scale and adapt as your business grows, any additional benefits they can provide, whether their values align with your own, their reputation among past customers or partners, their location, and the upfront investment required.

• Can they grow with your company?
• Can they provide additional benefits or resources?
• Do their values align with your company’s values?
• What do their current or previous customers or partners say about them?
• Are they in a good location for easy transportation?
• What kind of upfront investment do they require, and is it necessary for your business?

Does Risk Exist in Supply Chain Management?

To run a successful supply chain, managing risks is critical. While reducing costs is important, it can often come at the expense of quality and reliability in delivery. Traditional methods such as outsourcing, offshoring, and lean manufacturing can increase risks associated with the supply chain. To mitigate these risks, businesses must find a balance between cost and risk.

This can be achieved by adopting more modern approaches, such as implementing redundancies in the supply chain, utilizing information tracking systems, employing flexible supply contracts, and conducting regular risk assessments. These practices can help businesses minimize risks while maintaining the cost-effectiveness of their supply chain.

“Looking for transactional savings on shipments can hurt businesses in the long run,” Lynch added. “While $20 to $100 savings will be seen immediately, the long-term costs and impacts are significant.”

According to Lynch, it’s crucial to give due attention to your transportation provider. He emphasizes that since they are the last point of contact with your customer, they can leave a lasting impression of your brand.

What are the Ways to Handle Disruption in Supply Chain Management?

Being prepared for supply chain disruptions is crucial to managing your supply chain effectively. Supply chain disruptions can occur due to a variety of reasons, such as natural disasters, accidents, or pandemics.

According to Zippia, there has been a 14 percent increase in supply chain disruptions between 2019 and 2020. Ken Katz, national property risk control director for Travelers, suggests planning ahead for such disruptions.

Katz recommends businesses to identify potential threats, conduct a business impact analysis, and create a plan that includes information on secondary suppliers and other backups. A documented plan that includes prevention, mitigation, and recovery controls is crucial. It is also important to test and adjust the backup plan often so that the business can be prepared and experience the least disruption possible for customers.

In the event of an emergency, a business can start to recover by first reaching out to secondary suppliers. Regular communication with customers and suppliers is also important, as this level of transparency helps reinforce that there is a plan in place. It is also important to communicate with employees about next steps and how their day-to-day jobs might be affected.

Erika Melander, director of manufacturing operations with Central Insurance, suggests that businesses should obtain proper insurance as early as possible into their operations so that they can get things up and running quickly in the event of a disaster. She recommends contingent business interruption coverage as a possible insurance solution and encourages businesses to regularly check with insurance agents regarding coverage. Being proactive in identifying potential supply chain risks can help businesses put backup plans in place and prepare to react to a problem.

The Bottom Line

Effectively managing the supply chain can significantly impact a business’s bottom line by reducing costs, minimizing errors, increasing efficiency, and improving the overall customer experience. It involves a complex process of moving goods from one location to another, which requires careful consideration of various factors and selection of competent vendors to minimize risks.

By implementing best practices, businesses can optimize their supply chain operations, resulting in a smoother, more efficient process and improved profitability.