The Importance of Supply Chain

In general, supply chain management includes the planning, organizing, executing, and tracking of all supply chain activities to make sure that products and goods are delivered to your buyers at the most economical cost. Supply chain is the sequence of events that occur from production to shipping and delivery. The entire supply chain process consists of four stages:

The Planning stage involves analyzing the customer needs, collecting information, analyzing the market, determining how the product will be supplied, determining the cost of procuring the product, setting up the production facilities, preparing the raw materials, and finalizing the production and distribution processes. This is important because it decides which suppliers will be involved, the number of outlets, and the amount of inventory that will be needed. This stage also determines the date and time when the product is supposed to be delivered. During this stage, suppliers determine their maximum capacity, develop a manufacturing plan, create a pricing strategy, and set up quality control programs and service programs. Since supply chain largely affects competitive advantage, companies should ensure that they take the following actions:

The Planning stage is important, but it can only do so much. After the planning phase, there must be a decision on what to deliver and how to deliver it. Depending on the nature of the products involved, the delivery method can either be on a large scale, such as through a chain of trucks, or on a smaller scale, like with dropshippers. Large scale and local distribution can be more efficient, especially when done correctly, but these methods do incur certain risks. If wrong, customers can face poor service, delayed products, damaged or unusable products, and so forth.

After this stage, the next phase to consider is the development of the manufacturing infrastructure. This includes establishing the manufacturing plants, warehousing facilities, and delivery routes. It also involves training of staff in these areas, and the creation of effective systems to manage the entire chain. It is necessary to have all employees trained on how to properly handle these activities, and all records of processes must be documented.

Once the infrastructure has been developed and the production facilities are in place, production can begin. Production is dependent upon the capabilities of the plant, equipment, and the amount of materials being used in order to produce goods. Successful management of the entire chain will provide the framework for successful operations, but there are other factors that affect the speed of production, as well. For example, the greater the number of suppliers that can be accessed during any given time, the faster and more efficient the overall process will be. This is because all of the suppliers will work together to provide as many options as possible for clients.

The importance of supply chain in modern businesses cannot be underestimated. When a business needs supplies and wants them quickly, having an efficient supply chain is crucial. All companies involved in the process need to be educated on the proper management practices, in order to maximize the potential for success.