What to Consider When Building Your Supply Chain

Manufacturers need the right supply chain structure if they want to cut through complexities and reduce risks. While technological advancements, such as the Internet of Things and automation can help to streamline management, the type of structure that best suits a company’s goals is crucial.

Why the right supply chain structure is important

It’s very important to decide what supply chain model is best suited for the needs of a specific industry. Three common supply chain models – efficient supply chain, an agile supply chain, and a flexible supply chain – give some idea of why different models need to be used by different businesses.

An efficient supply chain model focuses on efficiency from end-to-end and enhanced forecasting. It is best suited for industries where there is intense competition.

An agile supply chain model is most effective for companies that manufacture products under very specific criteria for a wide variety of customers. The main driver is the ability to meet varying demands with shorter than usual lead times.

A flexible supply chain model is best suited for companies that need to meet varying production quotas with peaks of high demand and troughs of low demand. This model depends on adaptability and being able to adjust internal processes to meet specific customer needs.

These models are only a few examples of supply chain models and there are several questions supply chain managers need to address when evaluating which model suits the needs of the business best.

Factors to consider

The efficiency of a supply chain is related to transparency and visibility. Managers who address these two areas are likely to have optimal operation. To achieve this, they need to consider:

The industry framework: This refers to the interactions between customers and suppliers as well as technological advances and any other factors that can affect production cost and efficiency. Just some of these factors are demand variations, shorter product lifecycles and market mediation to cope with supply and demand.

A company’s unique value proposition: How can you leverage your company’s unique assets as a competitive advantage to encourage growth and profitability?

Internal processes: What links the company’s positioning in the industry and supply chain structure? What are the best practices for decision-making and who in the supply chain is responsible for making them?

There must be a connection between planning and execution across the whole value chain. Here is where advances in technology and automation platforms become valuable as a way of streamlining internal processes and improving certain operational procedures.

What can impact the warehouse supply chain

Seasonal fluctuations can impact a warehouse supply chain. In peak seasons businesses may be handling up to five times the typical workload and when a service failure occurs, it translates into delayed shipments and stock-outs.

Online stock-outs usually result in shoppers abandoning sales and this not only affect sales but brand loyalty too.

One way to ensure that orders are always ready in the right quantity and at the right time is by making projections. Making accurate projections includes using historical data and changes in the current year that may impact sales.

Retailers should also be in constant communication with third-party logistics vendors and suppliers, informing them quickly about any changes in purchase orders

The bottom line

Understanding the structure of a supply chain network is essential and without this knowledge, companies are unable to reach their goals and create a sustainable model that offers profitability in the short and the long term.

When the right structure is in place, there is an alignment between business goals and the reality of managing planned production programs.