2018-01-31 00:00:00Business InsightsEnglishUnderstand how supply chains work to help your small business stay in the black. Knowing the process that goes into every step of creating,...https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/02/Expert-Analyzing-Supply-Chain-Listners.jpghttps://quickbooks.intuit.com/ca/resources/business-insights/understand-supply-chain-system/Understanding the Entire Supply Chain

Understanding the Entire Supply Chain

4 min read

No matter where your Canadian small business sits within the supply chain, it helps to have a firm understanding of even the aspects that don’t directly relate to your company. By understanding how each component of the supply chain works, you can better create a strategy that works well for your particular industry. These elements may operate within a small geographic area, making it simple to see firsthand how they operate and decreasing the number of businesses who touch the products. For instance, local farmers who sell their wares at a local market or stand may deal directly with their customers or local grocery stores. But in an increasingly global market, chances are that some links in your supply chain work their particular brand of magic in another province or country.

Suppliers and Direct Suppliers

If you make products with numerous parts, chances are layers of suppliers sit above your own suppliers in the supply chain. This means that if your widget has eight different parts, your suppliers for those parts get their raw materials and sometimes semi-complete components from other businesses. For example, if you require metal and plastic components for your product and a direct supplier provides both, that business probably gets those diverse parts from different companies and then packages or pre-assembles them for your business. To stay on top of your game and keep up with your particular market, you should cultivate reliable suppliers and understand the trips your supplies take on their way to your door, as this can help you anticipate any shortages or price increases.

Producers, Manufacturers, and Wholesalers

The next step in the supply chain involves producers or manufacturers who assemble or machine raw materials or parts obtained from direct suppliers into operational products. These companies may be large conglomerates that provide goods to wholesalers or specialty concerns that deal in artisan products and sell direct to retailers. Typically, these companies don’t sell directly to the public, focusing instead on selling their products in bulk.

Distributors, Retailers, and Facilitators

Once manufacturers and producers complete their process, distributors step into the process, creating catalogues and sales sheets to pass along to retail buyers. Though some companies sell directly to retailers or even the public, most move their goods via facilitators who add value to the supply chain by matching up businesses who make certain products with businesses that wish to sell them. Facilitators usually have strong logistics on their side and are capable of warehousing and moving products from their facilities directly to retailers. Facilitators can also help you negotiate better supplier deals to keep your bottom line healthy.

Customers Who Purchase the Goods

Once retailers have items produced by manufacturers and stocked by facilitators, they’re ready to open their door to customers. Retailers that sell to customers can be anything from a big box store that stocks a wide variety of household goods, food, and clothing to small specialty shops that focus on one particular item or line. These retailers can set up shop in singular locations such as strip malls or enclosed malls with high-value anchor stores, or they can operate strictly online, letting customers buy their products online and then shipping them to their homes. In addition, customers can be business consumers who need multiple items for their processes yet not enough to warrant buying directly from manufacturers, producers, or wholesalers.

Indirect Supply Chain Participants

Besides parties who contribute directly to the manufacture and sell of products, indirect supply chain participants play a large behind-the-scenes role in the supply chain. These businesses might provide technological, accounting, or legal services for both big companies and small retailers, or they might sell them items that help them complete their part of the process, including tools, computers, office furnishings and supplies, or delivery services. Small businesses should remember to always include this segment of the supply chain in their planning, even though it might not be obvious. For instance, changes in accounting and legal firms can leave you without trusted advisers or consultants, and changes in software and IT standards can leave your computer systems vulnerable to outside attack.

Parties Who Influence the Process

Other parties influence the supply chain process without having a hand in product movement. These parties include banks and financial institutions that loan money to members of the supply chain as well as helping them manage their working capital and cash flow. Influential parties also include government officials who regulate and inspect key process components, as well as ensuring product and worker safety. Government agents also provide guidance when it comes to labour laws, equipment requirements, and transportation standards.

Specialized Services

Some companies don’t make or sell products at all but ply their trade in the service sector. These concerns might build factories or consult with managers on hiring, or they might provide IT services for data centers and server banks. Recycling companies can help all businesses within the supply chain better contain their waste, while laboratories and researchers can work with businesses to create unique intellectual property the company can build on to meet its particular needs.

Lots of knowledge and supplies go into the process of producing a product and then getting it to market and ultimately into customers’ hands. Understanding how the supply chain works and your small business’s place within it can help you build a strong company that adapts easily to changes in the market.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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