These are questions that entrepreneurs often struggle with. Entrepreneurship is fun, but many aspects of it are perceived as difficult or uninteresting. This article explains what the supply chain is, what it consists of, and what outsourcing certain parts of it can mean for entrepreneurs.
The supply chain
The supply chain is the entire system of organizations, people, activities, information, and (natural) resources that play a role somewhere in the process of a product or service from supplier to consumer. It is the transition from natural resources and raw materials to the end product at the consumer and everything that goes with it.
The supply chain is also referred to as the delivery chain. Broadly speaking, the chain consists of five parts: the supplier, the manufacturer, the distributor, the retailer, and the customer/consumer. Each of these entities has a share in the supply chain.
The supplier
The supplier delivers the (virtually) unprocessed raw materials and/or materials to the manufacturer. In practice, most products often require different suppliers for the various components.
The manufacturer
Once the manufacturer has received the materials from the (various) supplier(s), they process the raw materials into products. The manufacturer sells these products to one or more distributors.
The distributor
The distributor purchases the products and often stores them under its own management before reselling them to (smaller) traders and/or stores. In addition to storage, the distributor is often also responsible for transport from the distribution center to the stores.
The retailer
The retailer is the (intermediate) trader who sits between the distributor and the customer. An example of this is a (web) store. However, it is becoming increasingly common for this "middle man" – the retailer – to be cut out of the chain and for the distributor to deliver the products directly to the customer.
The customer
The customer, or consumer, is usually the end user of the product. They purchase the product in a store or directly from the wholesaler.
The different groups as outlined above are a simplified representation of the process. In practice, there are often several suppliers and manufacturers before a product is actually ready. Take a computer, for example: for one customer, a hard drive may be the end product, while for another, this hard drive is part of an entire computer. What the actual end product is depends on the market in which the entrepreneur operates and who his customer is.
Supply chain management
Supply chain management refers to improving processes and collaboration between the various parties in order to ensure that communication and the flow of goods run as quickly and smoothly as possible. Through good planning, clear communication, and structured execution, the supply chain is controlled so that each party knows when to order and/or deliver the goods. It goes without saying that supply chain management and software go hand in hand. There are software packages and IT solutions for both specific components and multiple sub-areas of supply chain management. Examples include software that allows the seller to estimate future demand or a program that gives a buyer insight into their supplier's stocks.
Planning
Careful planning makes it possible to predict future demand and calculate how much stock needs to be held—for example, what the minimum stock level for a product should be. In addition, it is necessary to predict what production capacity needs to be reserved and what the optimal sequence for goods production is.
Execution
Execution involves managing the physical flow of goods. These flows of goods are all logistical in nature. For example, consideration is given to what needs to be done with a customer order, how an order should be assigned to a product, and how orders can be picked efficiently in the warehouse. In addition, export relates to the optimal loading of trucks (or other vehicles) and feedback is provided to the various parties when an order has been delivered.
Outsourcing supply chain management
Controlling the flow of goods is often the part of supply chain management that is outsourced to a logistics service provider. By storing products in this service provider's warehouse, after which they are responsible for picking, shipping, and delivering the order to the customer, in many cases this can save the entrepreneur not only time and worry, but also costs. After all, this means that the entrepreneur does not have to purchase a warehouse, hire warehouse staff, or deliver the orders to his customers himself. In addition to transporting goods from A to B, HST Group is also the right place to come to if you want to outsource part of your supply chain management. Request a free, no-obligation quote now.