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How Does Supply Chain Management Work?

There are several different components that make up your supply chain. Proper management of the supply chain will allow you to understand how products are distributed to the customers and how they move along the way. You also get to see areas where your supply chain is failing so you can improve it and give your customers the best possible product in the shortest time frame.

With your supply chain you will start by determining the products that need to be delivered to the customers and where the product is in the production process. You need to see the product go from the production process to the distribution process so you can make the right changes to it in order to give your customers the best benefits possible. When you do this, you can manage your relationships with your vendors so you have timely deliveries but you also need to look at other things you can do for both companies such as having trade discounts. This is a great way to reduce costs as you are not going to spend as much money on raw goods as you instead work on trades that make it easier for you to keep your cash flow moving.

The supply chain is created with 3 main areas:
1. Product
2. Information
3. Finance

With these areas we have already touched on product. For you to create a product to sell it has to be in demand from your customers. You need to have a need for the product if you are going to continue producing it. Some companies often end up having a high production level but their inventory level is also huge as they do not have the demand for the products. Turn to a program like Just In Time manufacturing to help you properly manage your supply chain. This is a great way to control inventory since you are not producing products that are not in demand and you are not holding a large inventory that can be costly. The supply chain goes from raw goods through the chain all the way to the delivery of the product to the consumer. How does the customer feel about the time it takes from the order to receive the product? When you have a delay along the way, it causes them to become dissatisfied.

The information stage is a little bit different for you to understand as it deals with the gathering of information and defining it properly. You need to see what you have to change along the way to make the customers happier with their products. Timing is one of the areas that you need to focus on with customer delivery.

How much money are you investing in the production process? This is an area you have to evaluate. Investing too much money into the production leads to cash flow shortages for the company. You also need to work on getting the customers to pay in a timely manner for you to be able to invest more money into the production process. Having a strong collections process is key to the supply chain management component.

Proper sales forecasting is another part of supply chain management. You need to look at your sales from the past to help you predict the supply chain. It is important to look at the economy as well in order to see that you are not going to spend too much on your production when you do not have the sales to support it thanks to a weak economy. Good planning helps you to forecast correctly and gives you the chance to make improvements with your supply chain.

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