In the modern world, where people expect to receive their goods almost instantly, getting your supply chain in order is crucial to surviving.
This guide will help you understand your supply chain by explaining:
- What a supply chain is
- Why supply chain management is so important
- How supply chain management works in a small business
- How to improve your supply chain
- How Countingup can help
What is a supply chain?
A company’s supply chain is the entire process of making and selling its products. This process includes every stage, from supplying raw materials through manufacturing the goods and on to selling them to customers.
Every part of your supply chain should be designed to meet your target customers’ needs and help your business make a profit. These parts include:
- Product development – sourcing materials and manufacturing your product
- Marketing – spreading the word about your brand and products to attract customers
- Operations – how your business purchases and stores the goods
- Distribution networks – getting the products out to your customers
- Customer service – making sure your customers are happy with their purchase and helping them solve any issues they may have
What is supply chain management and why is it so important?
Supply chain management refers to how a company handles their supply chain. An efficient supply chain takes careful planning and management. When managed correctly, you could pay lower costs for faster production.
Supply chain management covers everything from product development to customer service and it’s important to get each part right. Otherwise, you run the risk of reducing your customer base and losing the competitive edge you need in the modern business world.
However, supply chain management isn’t just about creating the fastest process possible but also avoiding potential risks and ensuring everything runs smoothly. If one part of your supply chain is slow, it’ll create a bottleneck that will slow down the entire operation.
Think about it this way: when customers order something from you, they expect to receive it within the time frame they were promised (let’s say 2-5 business days). If your supply chain doesn’t run properly, you could risk the goods arriving late (or not at all!) or you might send the wrong order. As a result, your customer will not be very happy with you.
That’s why you need to stay on top of your supply chain management to minimise delays and mistakes. Without efficient supply chain management, the chain could fall apart from the very beginning.
How does supply chain management work in a small business?
In a small business, your supply chain might only consist of one supplier, yourself and your customers. Your supplier might handle the production stages of the supply chain and you take care of everything from there. If you have drivers, they’ll handle the distribution process.
Generally speaking, there are five stages to successful supply chain management, as listed below:
Stage 1: Planning
First, you need to establish what resources you’ll need to meet customer demands for a product or service and how much you’ll need of each. Plan how you’ll manage these resources and determine how you’ll measure if your supply chain is efficient, delivers value to your customers and meets your business goals.
Stage 2: Sourcing
Once you know what resources you need, you have to find suppliers that can sell them to you and establish processes to monitor and manage your supplier relationships. Key processes to consider include ordering and receiving the goods, managing inventory and dealing with supplier payments.
Stage 3: Manufacturing
You also need to organise the manufacturing process, including accepting deliveries, storing the raw materials, testing for quality, packaging them for shipping and scheduling deliveries.
Stage 4: Delivery and logistics
This stage is all about figuring out how to get your products to your customers as efficiently as possible. You need to coordinate customer orders and schedule deliveries to arrive within the promised time frame. Additionally, you need to dispatch your products, send out invoices and make sure you get paid.
Stage 5: Returning
The final step is to make sure you have a process in place if customers want to return damaged or unwanted products. Efficient supply chains need a fast and seamless returns process in order to build trust and confidence. After all, customers are more likely to order from you again if they like how you handled their return.
How can I improve my supply chain?
Successful supply chains are uncomplicated, cost-efficient and dependable. Take a look at your existing supply chain to ensure you’re using the best plan for your business. If you find any inefficiencies, like slow suppliers or delivery systems, consider replacing them. Below we’ve listed a few ways you can make your supply chain more efficient.
Evaluate your suppliers
Good suppliers are responsive, efficient and reliable. You can quickly improve your supply chain by cutting ties with suppliers that are slow with communication, regularly mess up orders or take too long to deliver your goods.
Plan around demand
One of the best ways to give your supply chain an efficiency boost is to plan it around historical demand. In other words, when are your products more popular? For example, if certain products sell more in the summer, work with your supply chain partners to ensure you have enough of that product in stock for that time.
Monitor your system
Remember that just because your supply chain works well now, it doesn’t mean it always will. To stay efficient, make sure you keep tabs on key elements of your supply chain to identify weak points. Your company will grow and evolve over time, so make sure your supply chain evolves with it.
Save time on admin with Countingup
Countingup is the business current account and accounting software in one app. With instant invoicing and automated bookkeeping features, it’s saving thousands of business owners across the UK hours of time-consuming admin, and helping them keep on top of their finances.
Find out more here to save yourself from unnecessary manual accounting admin so that you can focus on running your business.