Supply chain management is an important buzz phrase for entrepreneurs and turn-around merchants alike.
Intimidating as it may seem, the concept is very simple: to deliver services efficiently and competitively to your clients by cutting down on purchasing and management costs.
The Council of Supply Chain Management Professionals (CSCMP) developed a definition of the term in 2004:
Supply chain management "encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities.
"Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers and customers. In essence, supply chain management integrates supply and demand management within and across companies," the CSCMP concludes.
An efficient approach to the procurement, logistics, delivery and costs of parts and products for your business - known as a 'lean' model in some industries - will allow you to keep pace with your competitors.
The overriding need is for a workable system with which you can keep track of orders, materials, deliveries, profits and costs. For a start-up firm, this can be managed either proactively by you or by a designated member of staff.
Important tenets include:
- effective communication
- awareness of timings and events
- knowledge of costs and revenue
- remaining flexible
- supplier relations
- serving the customer
To keep customers loyal and ensure your business runs smoothly, you need to aim to fulfil the following objectives:
- order precise quantities of parts or products in sufficient time to prevent delays or void periods
- install a system with which you can keep constant contact with your logistics staff, or consider sharing transportation with a partner firm
- avoid interruptions to production from delayed fulfilment or delivery
- prevent a loss of sales by reacting to supply and demand:o raise prices to capitalise on strong demando lower prices to encourage more sales or undercut competitorso prevent losses by keeping shelves stocked
- keep purchase costs down to provide healthy profit margins
- cooperate and collaborate with suppliers:o plan and forecast replenishmento provide feedback from customers to encourage quality improvements
Ultimately, the objective is to establish a loyal customer base, drawn by reasonably-priced quality goods. To do so successfully, you may need a business loan to make initial bulk purchases, for which you should shop around to prevent paying too much interest.
© Adfero Ltd 2006