Supply chain management and its added value for companies
What is a supply chain? Often mistakenly defined as mere logistics, the supply chain represents all your service providers and has a direct impact on your merchandise, customer satisfaction and, above all, your cash flow.
In this article, we'll take a look at how it works, what goes into it, and how it can boost your sales tenfold.
What is a supply chain? Definition
Often defined as simply logistics, the supply chain is the sum total of all the suppliers, companies and service providers involved with a product, from its manufacture to its sale through distribution channels.
The aim of a supply chain is to make products accessible to your customers at the best possible price. To achieve this, the supply chain must be optimized as far as possible to make it as efficient as possible.
A company with good supply chain management ensures that it has the right level of inventory control to meet demand, while reducing the risk of oversupply and stock-outs.
The 3 components of logistics
The supply chain comprises 3 distinct components:
Physical flow
This is the movement and storage of goods, from their initial place of manufacture to their point of sale. This may be in a physical store, or the storage location from which the goods will be sold if your business is internet-based.
This flow includes the transportation of goods. It is often associated with logistics, as it takes into account the storage and transportation of goods.
Information flow
This enables the physical flow to be as operational as possible. It contains a wealth of information to anticipate any problems that may arise. For example:
- References for all the products your company sells,
- Information on all service providers involved in the supply chain,
- How goods are stored and transported from one place to another.
Administrative and financial flow
It's all about knowing how money flows between the service providers involved in the supply chain.
On long logistics chains, goods usually pass through many different countries, with different currencies and legislation (e.g. customs duties, etc.).
All these factors need to be taken into account to ensure that the delivery of goods does not fall behind schedule.
The benefits of supply chain management
Anticipate market trends
Internal communication between supply chain service providers enables more in-depth analyses to be carried out thanks to the expertise of the latter, providing a better understanding of the environment in which your supply chain operates.
Customer satisfaction
The supply chain helps reduce delivery times. If it is well optimized, you can easily anticipate the risks of stock shortages.
Improved cash flow
A well-optimized supply chain enables your company to avoid and reduce costs. As soon as you are able to assess your demand and supply, you can reduce storage costs.
The speed of your supply chain means you can deliver to your customers more quickly. This means you can invoice customers more quickly, and increase your sales.
The role of service providers in the supply chain
Having several companies involved throughout the supply chain enables the company selling the finished product to focus on the steps at the end of the chain. For example, handling the sale and delivery of goods to end customers, then managing customer support.
This makes it possible to outsource tasks to other companies specializing in different stages of the supply chain.
The service providers bring additional expertise to the table, and the services and products they handle will be of higher quality, with less risk of failing quality controls.
Supply chain risks
Although the supply chain offers many advantages, there are also risks that can disrupt organization and procurement. A single detail can block the entire supply chain organization.
Starting with natural and geopolitical risks: some of the countries through which your supply chain passes may be going through a period of crisis, or adopting a different policy towards trade with other countries.
These instabilities can impact your supply chain and your company's performance in a number of ways:
- Shortages,
- Increased taxes,
- Difficulty communicating with a supplier in the supply chain,
- Increased lead times, etc.
In view of all these factors, companies need to determine the importance of the supply chain in their organization, in order to anticipate all the factors that could potentially disrupt their business.
Article translated from French