Understanding Supply Chain Management

supply chain management 101: consumer, supplier, manufacturer, logistics, retailer

Every business that keeps items in stock is a supply-chain business, but for many business owners learning how to manage their supply chain is not a concern. It should be. Managing inventory and assets is a principle of sound management, and no business is too small to start off on the right foot – or correct your posture.

Supply Chain Management Overview

Managing a supply-chain involves controlling the flow of goods from the point of origin to the end-user. This definition is accurate whether the business is a manufacturing operation, fulfillment center, construction company, warehouse, or retail stockroom. In theory, all enterprises are supply-chain businesses, even businesses that provide services have assets that need to be managed according to supply-chain management principles. Heavyweights such as Walmart, Amazon, and Home Depot are extreme examples of supply chain management, using high amounts of company resources to manage the flow of merchandise through their stores and distribution centers. Smaller businesses may not need to allocate resources so intensely so long as they understand a few basic principles.

Supply Chain 101

Over 20 years ago Supply Chain Management magazine published an article (it’s been republished a few times since then) that has become a classic in the study and implementation of supply chains. This article is called “Seven Principles of Supply Chain Management.” Even with the advent of e-commerce, the rise of Amazon, and other economic factors that were not on the horizon back in 1996, the primary principles hold true. The article remains worth reading for any small business owner or warehouse manager – or anyone involved in management or C-level executive decisions. Here is a quick thumb guide to the seven principles –

  1. Adapt: Businesses should adapt their supply chains based on service needs of their customers. Some businesses like to go with the low bid. However, this can prove to be an issue. If a client is relying on timely delivery, it pays to go with the vendor who delivers on time. Likewise, when doing QC (quality control), it saves time to go with a vendor who provides a high level of quality, instead of a low price and lower level of quality. Price is a determining factor in the supply chain, but it should not be the sole factor used to evaluate vendors.
  2. Customize: Segmenting your logistics and customizing for each segment saves time and money. Remember that logistics does not only apply to goods that are outbound. Inbound logistics are as critical when it comes to maintaining a flow of goods.
  3. Align: Demand planning alignment starts with proper inventory control. Times of peak demand for certain products need to be delineated and planned for to avoid backorders or customer drop-off. Remember, your business is a part of a customer’s supply chain. Instituting inventory control practices such as inventory management software, barcoding, and Voodoo Robotics pick-to-light system are the building blocks of accurate inventory control and ordering.
  4. Differentiate: When working from multiple fulfillment centers or warehouses, the product needs to be differentiated according to the customer’s needs in that area. The shorter the chain, the faster fulfillment will go.
  5. Outsource: Outsourcing is not a dirty word. Outsourcing has become wrongly associated with offshoring. However, outsourcing means merely finding and deploying outside contractors so that a company can concentrate on its core competencies. It is a part of supply chain strategy that allows a company to focus on what it does well and outsource other functions. Looking at it this way, you could say that when a company hands a package to UPS instead of driving it over to the customer that they are outsourcing shipping.
  6. Develop: In this case, development means that a company should not hesitate to develop technologies that support the functions they need to carry out. For instance, adopting an inventory control software allows multilevel decision-making based on the information provided by a live inventory. Likewise, deploying pick to light technology can reduce the times for both ticket-picking and put away by giving pickers/stockers visual clues and information.
  7. Adopt: The principle of adoption, in this case, refers to developing financial and service metrics that measure KPI across the spectrum of the business – read this for a more in-depth look. KPI are Key Performance Indicators and are the equivalent of periodic physicals for your business. It measures the health and capabilities of an operation, as well as serving as a realistic method for setting goals and missions.

Get Up to Speed

Start studying supply-chain management to get a firm grip on the functions of your links in the supply chain. It’s a certainty that your competition has already adopted some or all of these principles. Adjusting your posture to meet the challenges of a small business in a highly competitive field should not be seen as an outlay of capital, but an investment in the future of the company.

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If the pick-to-light system avoids just a few mispicks, it’s paid for itself!

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