Most businesses define a supply chain as the activity between when a purchase order is placed, received by a vendor, produced, and delivered to a processing factory or warehouse for storage. But does a business make money when a product is delivered to their location? A supply chain includes much more and understanding that makes it easier to identify opportunities and optimize.
At the outset, that product should have been defined with specifications and instructions as to whether it is combined with other products to make a finished good or is simply distributed to customers.
- Are those specifications clear enough to prevent quality issues?
- Are specifications defined enough to allow you to send out for a competitive bid, if necessary?
That finished product needs to be packaged in an individual package or shipper, both of which must also be specified and purchased from a vendor and delivered to an common location.
- Are customized shipping packages used? If so, a premium is likely being paid and with a larger Minimum Order Quantity (MOQ) given the specialty of the package.
- Have you optimized your pack count to reduce corrugated spend? Moving from a case pack of 8 to a case pack of 24, for example?
The product must be both placed on a shelf when received and removed when shipped either manually or by material handling equipment.
- Are the products in your warehouse sorted in such a way that the higher volume items are close to the shipping/receiving point than those with lower volumes?
- Do you have the proper equipment to efficiently transport/pci-n-pack the product internally?
The product is packed into a truck managed by a transportation supplier who then delivers the product directly to a consumer, a store, or warehouse where this daisy-chain ballet continues.
- How was the transportation scheduled? Is it being done internally?
- Has the transportation spend been leveraged for better rates or is a 3rd Party Logistics (3PL) company utilized to pool your spend with others to gain heightened leverage?
A supply chain is closed with means for both the product to be returned and feedback received by the customer for the entire chain to continuously improve.
- Is there a feedback loop created to understand the customer’s satisfaction with the supply chain’s execution and is that feedback utilized internally?
In each of the activities above a specification is needed. Each element of the chain requires a supplier to be identified, negotiated with, awarded the service or product and then held accountable. Each involves decisions, analysis, systems to monitor and processes to continually improve.
How a business defines its supply chain is critical to understanding where internal improvements can be made. For help with doing so, please reach out to Forsyth Advisors.