Supply chain management and its added value for businesses
What is a supply chain? Often wrongly defined as simple logistics, it represents all your service providers and has a direct influence on your goods, your customer satisfaction and, above all, your cash flow.
In this article, we'll look at how it works, what it's made up of and how it can increase your sales tenfold.
What is a supply chain? Definition
Often defined as simply logistics, the supply chain represents 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 have products that are accessible to your customers at the best price. To achieve this, the supply chain needs to be optimised as much as possible to make it as efficient as possible.
A company with good supply chain management ensures that it has the right level of stock control to satisfy demand while reducing the risk of surpluses and shortages.
The 3 components of logistics
The supply chain has 3 distinct components:
Physical flow
This is the movement and storage of goods, their transport from their initial place of manufacture to their place of sale. This may be in a physical shop or the storage location from which the goods will be sold if your business is based on the internet.
This flow includes the transport of goods. It is often associated with logistics, since it takes into account the storage and transport of goods.
Information flow
This enables the physical flow to be as operational as possible. It contains a great deal of information that can be used to anticipate any problems that may arise. For example :
- The references of all the products your company sells,
- Information on all the service providers involved in the supply chain,
- How goods are stored and transported from one place to another.
Administrative and financial flow
This comes down to 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 is not delayed.
The benefits of the supply chain
Anticipating market trends
Internal communication between supply chain service providers makes it possible to carry out more in-depth analyses thanks to their expertise. This gives you a better understanding of the environment in which your supply chain operates.
Customer satisfaction
The supply chain helps to reduce delivery times. If it is properly optimised, you can easily anticipate the risks of stock shortages.
Improve your cash flow
A well-optimised 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 the 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 allows the company selling the finished product to focus on the stages 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 specialising in different stages of the supply chain.
The service providers bring additional expertise, and the services and products they handle will be of higher quality and less likely to fail quality controls.
Supply chain risks
Although the supply chain has many advantages, there are risks that can disrupt the organisation and supply. A single detail can block the entire organisation of a supply chain.
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 organisation in order to anticipate all the factors that could potentially disrupt their business.
Article translated from French