Every product has a series of steps to get from raw materials to parts to a finished product, and finally to the customers’ hands. This flow of goods and services from their original source to the customer is called the supply chain.
In this article, we’re walking through everything you need to know about the supply chain – what it is, key steps in the process and how to avoid common issues to optimise your business.
A supply chain refers to all resources, activities, people and processes involved in turning raw materials into final products and making them available to your customers.
The basic sequence of events that products and services move through is as follows:
Raw Materials -> Supplier -> Manufacturer -> Distributor -> Retailer -> Consumer
Depending on the type of business you run, you might be involved in every stage of the supply chain or just the beginning, middle or end.
Even if you’re only directly involved in part of your supply chain, it pays to have a handle on the whole network of processes that goes into producing your business’ products or services.
Let’s imagine Joanna runs a business producing handmade candles. Her supply chain might look like this:
First, she buys her materials from suppliers, including:
Second, she makes the candles in a small shared workshop space.
Third, she stores her candle inventory in her garage, which she has set up with shelves and labelled boxes.
Finally, she transports finished candles to local market stalls and boutiques to be sold to customers.
Supply chain management is the process of overseeing the flow of goods and services as they move from their starting point all the way to finished products.
Effective supply chain management can speed up the delivery and supply of goods, as well as lead to other major benefits such as:
There are five main steps involved in supply chain management:
This step involves planning all the resources needed to produce a business’ product or service within a reasonable timeframe. At this stage, establishing metrics for production times and costs can be useful for tracking whether the supply chain is efficient and delivers value.
Next is to choose suppliers and establish processes to manage supplier relationships and processes such as ordering, receiving, managing inventory and supplier payments.
This involves organising all the activities required to manufacture or prepare the product for sale, test for quality and package for shipping.
After products are prepared for sale, the next step is to plan and coordinate customer orders, deliveries, dispatch schedules, customer invoices and payments.
The final step is to work out a process to take back unwanted, defective or incorrect products. Also called ‘reverse logistics’, this step is important for ensuring good customer service from start to finish.
Some of the most common supply chain issues businesses face include:
Although almost any business can face these challenges, there are several strategies you can use to optimise your supply chain and help avoid common pitfalls:
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