Sometimes, supply chain management is misunderstood though it is essential for both suppliers and retailers. The supply chain for suppliers and retailers is impacted by teams, departments and so many individuals. The big decisions are taken and recommendations made all affect the bigger picture in the long run.
In net, the process involves management and planning of sourcing, procuring, logistics and conversion activities. Supply chain management also includes collaboration and coordination with various partners, including product sourcing companies, third-party service providers, suppliers, retailers and intermediaries.
Imagine supply chain management as a strong link between business processes and their functions. It develops a high-performing business model, comprises the activities of logistic management and production. Moreover, this drives coordination between an array of marketing channels, marketing, designing, sales, accounting and information.
What is a supply chain, anyway?
Generally, a supply chain is a system of organisations, individuals, various activities, advanced technology and resources involved in procuring a service or product from one supplier to a retailer. In supply chain, there involves a lot of activities. The major includes transforming raw materials and resources into a final product and delivering it to the retailer. To constantly evolve in today’s retail landscape, you need consistent focus on optimising supply chain management.
What is the purpose of this chain?
- To get the right services and products from product sourcing companies and deliver them to the retailer at the right time,
- To offer products/services across to different pieces of the supply chain,
- To offer products/services at the lowest cost.
When management is done effectively, it becomes beneficial for both the suppliers and retailers. Plus, it minimise goods’ cost sold, hence, improving both the margins.
Who are customers and suppliers?
You will find many players in the supply chain, including warehouses, factories, network, transportation, and people. Everything adds up to the complexity of the entire method. It is often assumed that the supplier owns the goods company and the customer is the retailer.
But, the truth is supplier and customer’s roles change in every step of the supply chain process. The changes are explained below in significant 4 steps.
- Step 1- The company becomes the customer for receiving raw components from the manufacturers.
- Step 2- Here, the company becomes the supplier to the retailers.
- Step 3- The retail store turns into a customer when products are shipped from a warehouse supplier.
- Step 4- In the final stage, the retail store becomes the supplier as they sell the products to the consumers or users.
In every stage, the suppliers and customers try to meet the demands in the market. If they fail to meet the supply demands or run out of stock, it affects the entire supply chain system.
What are the ‘flows’ in the supply chain?
a) Information Flows
There is a broad range of elements that influence the information flow for retailers. These include- product specifications, general trade conditions, inventory levels, forecasting, order placement and tracking. Some examples to look at:
- General conditions of trade (GCT)- These are rules and principles of suppliers or retailers as they relate to business and trading partners. Remember that suppliers and retailers’ trade conditions may conflict, but these needed to be addressed and resolved. GCT consists of discounts, credit terms, delivery methods, return policies, minimum order quantities and more.
- Forecasting- A sale forecast shows what the retailer demands for the products or services from product sourcing companies. In the product supply chain, the forecast is one of the most challenging information exchanges. This is all about what can happen in the future and has a lot of uncertainty. The accuracy needs to be as essential as the outcome.
- Inventory levels- Managing inventory means maintaining the cash flow for both the retailer and the supplier. The process is complex and critical. Inventory should be at the lowest level without opting for out-of-stocks. Out-of-stock can happen at different points at store level, but the real challenge lies in balancing cost and inventory availability. The bonus is, it benefits suppliers and retailers. The latter relies on suppliers’ in-store products, which is also called Vendor-Managed Inventory or Supplier-Managed Inventory.
1. Product Flows
The flow of products starts with a product’s raw elements. The cycle continues till the goods are manufactured, product orders are fulfilled, products are transported and products are returned.
There are many crucial steps involved in this process that is beneficial for retailers and suppliers.
2. Financial Flows
As the name suggests, financial flows are all about product pricing and invoicing, payment discounts, received money, credit terms and more. Managing the accounts effectively increases cash flow for business and marketing, operations, inventory and capital investments for retailers and suppliers.
What is the role of retailer’s logistics?
Whenever you come across some large or massive retail stores in the world, you can be certain that they run some largest and advanced logistics operations. Nevertheless, small retail companies are not falling back. They strive to keep the cost of logistics low to increase operating margins. As a part of their strategies, they may:
- use and manage their vehicles to deliver goods to the stores from their warehouses,
- run distribution centres to minimise the cost of transportation, lowering the number of deliveries and increasing service levels,
- concentrate on their constant efforts to improve the sustainability of the whole logistics operations.
In a nutshell, the supply chain is affected by various departments, business heads, and teams’ choices and decisions. Multifunctional teams need to understand the different sides of the supply chain whilst procuring products from product sourcing companies.
Additionally, they should consider the changes and recommendations that can affect the overall supply chain process. As the suppliers and customers’ role changes, they must intent to meet the gaps of supply demands so that the supply chain remains intact in the long run. Operating a supply chain is not easy, it involves team work and willingness to face the challenges that can crop up anytime.