Understanding the four elements of the supply chain is a critical component of success for manufacturers, wholesalers, retailers, and other organizations. Supply chain management impacts nearly every aspect of an operation and, with so many variables, it’s impossible for even the most well run company to completely avoid hiccups. Managing and mitigating these complications is a matter of viewing your supply chain holistically and strategically. Understanding the big picture is key, so let’s look at the four elements of supply chain management.
Integration
Information sharing and data analysis capabilities will be key throughout the process. Integrating your communications systems with those of your supply chain partners will provide a foundation for building success.
Often referred to as the brain or heart of the operation, good integration will allow you to strategize, plan for issues, and eliminate errors, while staying on time and on budget. Failing to properly address this foundational element will make it more difficult to perform in all subsequent areas of supply chain management.
Canadian Alliance President William McKinnon touts the advantages of a compatible system.
“Companies need to be very adaptable to open source integration,” he says. “If you try to operate in a proprietary manner without looking at software solutions that integrate, you won’t be very successful. Third party logistics companies that are able to create business networks on a common software platform will ultimately be better able to service their customers.”
Operations
Operations are the day to day backbone of the company. Achieving peak performance is possible when inventory and production schedules are supported by real time information.
The best companies are constantly re-evaluating their infrastructure and processes, allowing them to capture efficiencies. Manpower and other inputs can be managed more effectively when companies better understand their operational processes. This can be better achieved by companies who know what they’re working with and making inventory management the key.
Supply side complications and rapidly fluctuating demand schedules have made it difficult for companies to maintain smooth operations in recent years, but this only highlights the importance of a strong logistics operation.
An important aspect of this is understanding the needs of your customers.
“What companies struggle with is demand,” says McKinnon. “You can’t be lean in your manufacturing if you don’t understand your customers’ buying cycle. Many companies are simply reactive.”
Purchasing
The purchasing and procurement of materials, supplies, tools, and equipment is necessary in order to function. Without these things, your operation will grind to a halt. Simply put, an organization must know what it will need, how much of it, when, and where to get it. Over and under buying is to be avoided.
Since no organization exists in a vacuum, it’s important to consider global trends, competitor activity, and industry developments when assessing the marketplace.
Information technology can inform decision making here, but McKinnon believes that human expertise and relationship building remain the name of the game.
“I haven’t heard one customer say they’re buying based on artificial intelligence,” he says. “If they are, they’re keeping it a secret, because they’re smarter than somebody else.”
Owning an entire supply chain is impractical and virtually impossible, even for large multinationals, so suppliers are fundamental and should be assessed on the basis of their quality and reliability.
Ideally these interactions should be routine, but this is not always the case. When complications arise, companies will benefit from a robust network of backup options. Establishing and maintaining this network should be an ongoing priority, not a last minute scramble.
Distribution
The fourth element of supply chain management involves getting your product where it’s going, on time, and in good condition.
Primary tasks in distribution include warehouse management, transportation, and delivery. Optimization is an underlying and ongoing goal.
Only when distribution has been successfully completed will the supply chain loop be closed. Some elements of this task will change depending on your business model, as wholesale, e-commerce and other operations each have their own unique challenges. Returns cannot be overlooked.
Like the other supply chain elements, distribution is best handled by companies who give it forethought and seek to strengthen their network and processes on a constant basis.
It’s a mistake to treat supply chain management as anything less than a critical component of operational success. It can literally make or break an organization.
As the above list illustrates, your organization is but a point in a supply chain that begins before you and extends past you. By understanding the four elements of supply chain management, companies will be better able to assess where their strengths and vulnerabilities lie.
A quality third party logistics partner can help create efficiencies and alleviate headaches. Canadian Alliance offers a complete suite of supply chain and logistical services including warehousing, distribution, inventory management, and transportation. We also offer experience and insight, which can prove invaluable to clients looking to navigate a complex and dynamic global supply chain system. If you’re looking to strengthen your supply chain management, contact Canadian Alliance Terminals today!
Cited Sources
Personal Communications with William McKinnon