How Small Businesses Can Benefit from Supply Chain Management
The products that fill the shelves and barrels of your favorite retail store go through quite a journey to find their way to your shopping cart. Any physical good that can be bought has to go through a supply chain, from manufacturer to supplier to retailer and finally to the consumer.
Supply chain management is determined to run supply chains efficiently and effectively. Such strategies incorporate product development, sourcing, production, and logistics, each assisting in creating quality products and coordinating their flow to the consumer. The supply chain occurs in many different forms, but the most common structure contains four different entities:
- Suppliers. These entities offer the materials needed to create the product, whether they're raw materials or individual parts of a finished product.
- Manufacturers. This phase of the supply chain involves bringing together all of the parts provided by suppliers to create the finished product.
- Distributors. These entities stock and sell the finished product at a physical storefront or online store.
- Customers. Consumers generate demand, ultimately influencing the number of products and the overall supply chain structure.
The organizations that create the supply chain are linked together through physical and informational means. The physical element includes the creation, shipping, and storage of goods – the obvious, visible part of the process. However, the informational element that allows supply chain partners to communicate and control the flow of goods is critical to coordinating goods.
Without a strategy, supply chain and transportation risk becoming cost centers that can negatively impact a brand.
How to choose supply chain partners
A single business can't do the whole by itself regarding the supply chain, so it's necessary to pick some supply partners.
Reducing supply chain risks
Risk management is a key driving force in creating a supply chain. Reducing the costs of a supply chain carries inherent risks of reduced quality and unreliable shipping times. Common practices such as outsourcing, offshoring, lean manufacturing, and just-in-time increase risk levels. Countless industries seek the right balance of risk and cost, using more modern approaches such as supply chain redundancies, information tracking, flexible supply contracts, and risk assessment measures.
Handling a disturbance in the supply chain
Part of deliberately managing your supply chain is being prepared for disruptions. Disruptions can arise for a variety of reasons, but it's particularly common in the event of natural disasters. According to a study of more than 1,000 businesses, the Travelers Business Risk Index found that disruptions' greatest supply chain risk is associated with getting materials from suppliers. This and other supply chain disturbances might become a problem after events like hurricanes, earthquakes, tornadoes, wildfires, or other disasters.
In an emergency, you can start to recover by first reaching out to secondary suppliers. Communicating with customers is also important. Regular communication with customers and suppliers is crucial until the supply chain recovers. This level of transparency supports to reinforce that there is a plan in place. Communication with employees about the next steps and how their day-to-day jobs might be affected is also crucial. Businesses get proper insurance as early as possible in their operations so that in the event of a disaster, they'll be able to quickly get things up and running. Contingent business interruption coverage as a possible insurance solution encouraged businesses to regularly check with insurance agents regarding coverage.
