What is a supply chain, and why is it important to every business? In simple terms, it is the sum of the raw materials, logistics, personnel hours and customer contact hours necessary to satisfy the end user of your product. A supply chain is often mistakenly thought to be the cost and transport of materials alone, but that is just one small component. In fact, some definitions of a supply chain contain only materials and their movement, or logistics. Logistics play a big part in efficient supply chains, but so do quality, sales and customer satisfaction.
An effective supply chain starts with research. Knowing who manufactures the best materials and parts is a great start, but consistency is just as important. If an automotive supplier makes a superb carburetor but one in fifty is defective, the supplier is not the best choice for an automaker. Until they work out their supply chain (or other) quality problems, the car maker is better off using a more consistent supplier.
Forecasting is the process by which a supply chain gets created. How many products will sell? How many can be inventoried, and what tools and supplies are critical to the process? Every company that makes a product is in the beginning, middle and end of many supply chains. The carburetor maker gets parts and materials, as does the steel maker who delivers sheet metal and castings to the carburetor maker, and so on.
Each company needs accurate forecasting in order to compete on price and quality for its products. The more managers know about every aspect of their business, the more accurately they can forecast their needs.
Not every manufacturing situation works intuitively. For instance, it seems like common sense that if a company produces 50 pieces in one hour, making 60 in an hour would be better. But the process could break down going that fast, sacrificing quality and overloading inventory. Costs go up and quality goes down.
Another important component in an effective supply chain is delivery/inventory. Can the carburetor company make and ship parts when the automaker needs them, and not before? Just-In-Time (JIT) inventory control demands that parts not sit on shelves for long, waiting to be used in the end product, in this case, a new car. Cars, in turn, must be shipped and sold in a reasonably short period.
Who can consistently transport parts and materials, speeding delivery when needed or perhaps delaying delivery for a short time? Delivery and storage problems can disrupt any supply chain because each link in the chain depends on the one before it. Have you ever heard the phrase, “a chain is only as strong as its weakest link?” It is as true in supply chains as in any other chain.
Customer service before and during manufacture, and the satisfaction of the end user, are both integral components of a supply chain. Analyzing these activities as they happen allows key personnel at the manufacturer to improve the supply chain process. In the case of the faulty carburetors, for instance, the earlier that quality control personnel find the problem, the fewer bad parts reach the final customer.
Good research also tells a manufacturer if seasonal sales will be good (in the case of those kinds of products) or if sales are trending up or down for other reasons. These forecasts are used to regulate inventory for everything from office supplies to energy purchasing. Those are also parts of the supply chain.
So, the most important item in every supply chain is intelligence: having answers to questions and problems involving all aspects of the manufacturing business, from office personnel to resource management to shipping supplies. Every link in the chain can be improved, and realizing that fact is the first step in improving the process continually.
We have a series of articles coming up on supply chain , stay tuned. Got to our Operations Field section to learn more about supply chain and operations field.
OperationsManager.com Supply Chain Specialist