The Importance of a Well-Organized Supply Chain

The Importance of a Well-Organized Supply Chain

A high percentage of business costs come from the supply chain, as much as 80%. A supply chain can make or break a business. Especially if a business outsources manufacturing, they yield a lot of trust to their manufacturers.

A startup or an established business should understand supply chain logistics management to boost growth. A successful supply chain catalyzes business growth by saving time and money, the two most valuable business assets.

Continue reading to learn all about the supply chain.

What is a Supply Chain?

Most people think that a supply chain is only referring to the shipping and hauling of a business. The supply chain expands far beyond this sector. The supply chain is defined as all the network of suppliers and company players that turn raw materials into a finished good or service.

Let’s give an example of a common supply chain in the apparel industry. The supply chain to create the finished garment you are wearing now might include a fabric mill, notion supplier, patternmaker, designer, grader, manufacturer, product placement and distributor. This team of players all work together to create one finished good that is shipped to a customer or retailer.

The players along this supply chain can be people or companies of different languages, experience levels, and time zones. Supply chains can be outstretched across the globe. That is why the most efficient businesses have supply chain management analysis.

How to Run an Effective Supply Chain?

Generally, the more players in the supply chain, the higher the costs. Instead of a business doing all the work themselves, they have more hands-on deck to help.

It is important that a business analyze its supply chain regularly for that reason. Sometimes outsourcing parts of the supply chain mean finished goods and services can travel fast. However, sometimes it ends up costing more because there are too many hands in the pot.

Some of these costs include overhead costs, costs to resolve quality mistakes, logistics costs, loss of sales due to late deliveries, and high lead times. To avoid these costs a business can insource parts of its supply chain. When deciding what parts to insource consider where you are spending the most money and where your team has the highest skills.

Going with the apparel company example again. It wouldn’t make sense for a company to insource its manufacturing if its team doesn’t know how to sew or have the proper manufacturing equipment.

However, it might make sense for an apparel company to hire its own designer that can focus on creating for them alone. This will translate into faster designs that can be quality-checked.

Manage Your Supply Chain for Satisfied Customers

A supply chain is directly tied to customer satisfaction. A supply chain with gaps or poor communication will cause problems. Incorrect deliveries, late orders, or faulty products arriving to the customer are supply chain inefficiencies.

It is vital for any business to consistently reevaluate its supply chain. Contact us today to make sure you are making the highest return on investment every step of your supply chain!