The Crucial Basics of Supply Chain Management Systems

Understanding the basics of supply chain management is crucial for your business. If you picture the literal ‘supply chain’ for a product, where raw materials are acquired, transported to manufacturers, then to wholesalers, then retailers, then to the consumer, you quickly get an idea of the importance of a solid supply-chain management system.

Regardless of where your company is in the chain, maintaining the integrity of the entire chain is crucial to your business. If the leather shoes that a manufacturer produces don’t get into the consumers’ hands as expected, the manufacturer can suffer lower sales, high inventory levels, less demand for raw materials, disrupted transportation schedules, and all sorts of other ‘ripple-effect’ consequences that few businesses can anticipate.

So now that we know its importance, let’s take a closer look at supply-chain management. Unless you are at the very beginning of the chain, like a raw materials producer, or at the very end, like a retailer or transportation company, there will be three main sections of your supply chain management system.

1. Procurement Support

Procurement support means you get the materials, information and services you need before you can properly fulfill your link in the supply chain. In the leather shoes example, the shoe manufacturer would need procurement support to make sure it had enough leather and other materials to meet the shoe orders its customers placed.

Beyond the basics of raw materials metering, procurement support includes EDI to manage relevant information, including purchasing and invoicing; reverse logistics to manage the backwards flow of information and materials; consolidation of incoming products and information, and the preparation of incoming materials, like de-stuffing and conditioning, to get them ready for the process your company puts them through.

2. Product Preparation

In a nutshell, product preparation is everything your company does to get your products ready for its journey onto the next link in the chain. While the shoe company makes shoes, the manufacturing process is not usually considered part of the supply chain. But just about everything that happens to the shoes after they come off the assembly and finishing lines is considered part of the chain because those tasks are generally related to moving the product out of the shoe factory to the warehousing, wholesaler or retailer that will handle them next.

Product preparation means adding value to the product you produce through some or all of a number or tasks and processes, including preparing a product mix; assembly and/or sub-assembly of the product or its parts; packaging and re-packaging; custom labelling of product packaging; product inspections and quality assurance processes.

3. Distribution

While the progress through the entire supply chain is really the complete distribution picture of a product, the distribution of the product to the next link in the chain is usually the main concern of any particular company. For the shoe manufacturer, among other distribution tasks, the company must make sure that shipments made up of different SKUs of shoes are properly assembled for each individual order, in time to be loaded onto the truck or train that will take it to a shoe wholesaler, and they must track everything en route.

Supply-chain distribution processes include order picking and packing; real-time order tracking, so that any disruption can be immediately addressed; load planning and scheduling; carrier management and scheduling; delivery logistics, including cross docking and intermodal transportation, as needed; and customer service support to keep your clients happy.

It all looks so easy ‘on paper’, but, if your company’s main focus is doing what you do, optimizing your supply chain can take that focus off of your core business, which can get costly.

Outsourcing your supply chain management to a third-party logistics company, one with the systems and processes in place to streamline the supply chain, not only gives you more time and resources to devote to your core business operations, but it can reduce the bottom line costs of managing the supply chain. If you’d like to learn more about how to make that happen, give us a call here at Pival, we’re ready to show you how optimize your supply chain.