Supply Chain 101: Everything You Need to Know​

an warehouse employee moving inventory items and boxes

Want to gain more insight into the whole supply chain process and how it can improve your business? This page has all the details you need.

Supply Chain 101: Everything You Need to Know​

Want to gain more insight into the whole supply chain process and how it can improve your business? This page has all the details you need.

an warehouse employee moving inventory items and boxes

In today’s world, where many people prefer shopping online from the comfort of their home rather than going to a physical store, it is no wonder that the retail world is changing rapidly. In the past few years, the popularity of eCommerce has skyrocketed to a level that was yet unforeseen. Especially with the rise of COVID-19 and the worldwide pandemic, internet shopping has become a necessity rather than a luxury.

But the world of eCommerce is not as easy to survive in as one might think. People have changing demands, and the companies also have to constantly change their strategies to keep up. The world of eCommerce is hugely competitive, and every business is trying its best to reach the top. So what do you need to do to stand out?

The Asian online market is ever-growing, and many companies and businesses want to tap into this growing market to make a profit. If you also want to make it big in this market, ensuring your business has a sustainable supply chain is essential. Truthfully, the supply chain of your business is the backbone that your company depends on. It is a network that connects the different aspects of your business in a chain. Each link must be appropriately managed for the whole system to function well.

But what exactly is a supply chain? And why is supply chain management so important? In this article, we will answer all of these questions and more. So if you want to learn about the supply chain in detail and how improving it will help you earn more profits, read this article till the end.

dark warehouse filled with products inventory

What is a Supply Chain?

In simple words, the supply chain is a system or a network that connects the different parts of your business. It begins with the suppliers or manufacturers who send you the raw material and make your product. Then it connects the various other stages that your product has to go through before it reaches the final client or buyer. It is not just a network of multiple processes but also many different entities, people, and information. In other words, we can describe the supply chain as the stages that a product has to go through before finally reaching the end customer. The steps it takes for a product to get the buyer from its original state is the supply chain.

Supply chains are crucial for a business to run smoothly. If all of these steps are not well-coordinated and smooth, then the company will not be able to make timely and hiccup-free delivery to the customer. Constant customer dissatisfaction will result in people not buying from that business anymore. That is why businesses that want to scale up always look for new ways to make their supply chain process more efficient.

Customers expect faster deliveries and a responsive customer service system in today’s world. It is not enough to have a wide range of good quality products. You also have to improve your supply chain to meet customer expectations.

automated robotic arm sorting parcels boxes inventory

What is Supply Chain Management? ​

If you have an efficient Supply Chain Management process in place, not only will it cut down your expenditure but also minimize your production time and waste. That is why you must improve your supply chain management process and make it more efficient by hiring experts in the field and investing in new technology that will make tracking and managing data much more manageable. As the supply systems are becoming faster to the increasing demands of new customers, you can easily track more valuable data through an efficient supply chain management system. It will also help you see where you can make further improvements to make your supply chain process more capable.

Here are some ways you can benefit from having a capable supply chain management system in place:

  • Through data procured from the system, you can identify many potential problems before they cause your business to take a hit or your customers to be disappointed in your service. For example, through cutting-edge supply chain software, you will be able to predict if a product is going to go out of stock soon and how much the customers want it. If you see the trend saying that customers might order it in a large amount again, you can ask your manufacturer to make sufficient amounts of that product. This way, you will have less waste and your customers will not be disappointed either. 
  • Through data collected over time, you will also be able to predict when a particular product is going to sell a lot more than usual and when its sales will drop again. For example, some products sell more during holidays, and their sales drop after the holidays are over. If you can predict trends like this properly through supply chain management, you will be able to produce the right amount of necessary products and avoid extra waste. 
Supply Chain

What is the Main Goal of Supply Chain Management?

As we already discussed why supply chain management is essential for a business, let us delve into the main goals of supply chain management. It is important to remember that a sound supply chain management system will be able to manage the flow of goods, from the manufacturer to the end client, flawlessly.

The reason behind improving your supply chain management system is to identify the problem areas in your supply chain network and improve them to increase the flow of cash and make deliveries to your customers faster. You have to design it to analyze a vast amount of essential data and show you which parts of the supply chain are functioning well and which ones are underperforming.

Ensure that this management system is aligned with your company’s financial and upscaling goals so that you can move the flow of your supply chain in the direction you want to achieve those goals.

Types of Supply Chain

3PLs are designed to maximize speed and efficiency in the fulfillment process as expanding businesses deal with increasing order volumes. A 3PL company has strategies to lower delivery times and shipping costs that positively impact customer experience. Thus, partnering with a 3PL means that a business gains from the expertise and experience of 3PLs in handling e-commerce fulfillment.

If you’re wondering what 3PL providers do, here’s a list of some core logistics functions 3PLs perform to free up e-commerce companies to focus on other core aspects of the business:

Fast Chain

If the products you sell have a shorter market life cycle, this model can be used in your business. Businesses that change their product line often to keep up with the trends use this more. This model is more focused on responsiveness, and you will understand why. According to this model, business owners flood the market with their products as soon as a new trend is born.

More importantly, large fashion and apparel brands sometimes create trends through marketing and PR to make their products trendy and thus, popular. This model depends a lot on advertisement and quickly changes with trends.

Continuous Flow

The continuous flow model or the continuous model is one that many older established companies use. This supply chain model ensures a steady flow of products hitting the market at a scheduled time. When a larger, famous company establishes its customer base and knows there is not going to be much up and down on that scale, they use this model to supply their products in the market while searching for new markets they can expand into.

Agile

The agile model of the supply chain is made for specialized businesses. If you run a business that produces and sells specialty items that focus more on handiwork than volume, then this might be the perfect supply chain model for your company. It is designed for businesses that focus more on expertise than automation. That is why specialty businesses that use this supply chain model can ask for higher prices for their products. In this model, all the supply chain sectors usually work at a similar amount to make it successful. But in the end, if you want to focus more on volume than expertise, then this model is not a good fit for your business.

Efficient

As the name suggests, this supply chain model focuses more on efficiency. We have to keep in mind the fact that this model is mostly used by businesses whose fields are highly competitive and ripe with similar products. The priority of this model is efficient inventory management and getting the highest amount of output from all the labor and production equipment that they have. To stay competitive, companies that make trendy items produced by several competitors and sold to the same group of consumers rely on this highly efficient model.

Flexible

The flexible supply chain model is used by businesses that make products that go through several high and low demand phases each year. The businesses that use this model have to ensure that their stocking algorithm is highly accurate to adequately stock the necessary amount of products year-round. They also have to plan their inventory and shipping really flexibly to meet customer demand. For example, companies that sell stationery items have a high demand for products when the schools open up. They also need to have enough products in store for the rest of the year, even when sales are lower. So their supply chain model needs to be flexible.

Custom-Configured

This model can be considered a cross between the continuous flow and agile models. Essentially, those two models are entirely different in their functions. But what if a company makes products that have a consistent sale value all year but also have the option of customization, making it a specialized item of sorts? Then these companies can use the custom-configured model, which is a blend of agile and continuous models to suit their needs.

Supply Chain Strategies

slotting strategy

We have already talked about the different supply chain models and what they can offer to each type of business that you own. But it does not end there. You have to customize your supply chain to make it the most efficient and responsive to satisfy the customers. But for that, you will need a solid strategy that will improve the state of your business. Here are a few key strategies that you should keep in mind while designing and managing your supply chain. 

Be Predictive

When we are talking about an eCommerce business, there is always something that can go wrong and delay your supply chain. Machines can malfunction, and shipment or delivery might be delayed due to high traffic or bad weather. Even though you cannot change these phenomena, you can use predictive technology that will help you forecast some of these anomalies and plan your shipment and delivery around them.

There is something called digital twin, which is a predictive solution many companies use to forecast when a machine might need servicing and warn the manufacturers about potential problems beforehand. Through this, you will be able to predict anomalies in devices.

Automation Integration

Integrating technology that makes a lot of the supply chain management work automated is another intelligent strategy that many companies use. Robotics processes, AIs, and other software are being used by many large businesses to automate many manufacturing processes. They are also being used in warehouses to make the inventory process smoother and more efficient.

Now even customizable items can be manufactured in a high quantity through these remarkable new-age technologies, making it easier for companies to meet their customers’ rising demand.

Customer Centricity

By focusing on the demands and needs of the customers, you can change your supply chain process to satisfy the customers and receive a better brand image. If you can accurately forecast demand, you can also match your inventory to suit the rise and fall in demand for specific products. This way, not only are you making the customers happy by meeting their needs but also cutting back on the extra cost of inventory and preventing wastage of products.

Total Visibility

This is a practice that will make your supply chain management process more efficient. Total visibility means having an eye on every aspect of the complex network that is your supply chain. If you have total visibility, it will also make it easier for different sectors of your supply chain to communicate with each other. And since it gives you a holistic view of the details in your supply chain, you can make changes to it if you want to.

automated robotic arm sorting parcels boxes inventory

Supply Chain Management vs. Business Logistics

SCM or Supply Chain Management and the logistics of a business are very closely related to one another and have a lot of similarities. But there are also a lot of differences that set them apart from each other. 

  • Logistics are only a part of the whole SCM process, which involves various other activities planning and overlooking, such as inventory management, manufacturing, labor planning, delivery, etc. 
  • The process of SCM exists to achieve a more efficient supply chain that will give the business some advantage over its competition. On the other hand, logistics primarily focus on customer satisfaction. 
  • The SCM system manages all supply chain processes, starting from sourcing materials, manufacturing, warehousing, transportation, and until the product is delivered to the final customer. On the other hand, logistics only focuses on efficiently delivering products to achieve customer satisfaction. 
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What are the Stages Within a Supply Chain?


As we already mentioned, a supply chain is a network that connects the different components of a business’ system of product management. It starts from planning and sourcing, and after the processes of manufacturing, warehousing, and shipment, ends when the final buyer receives the product.

Here are the five key components or stages of the supply chain that you need to work smoothly for maximum responsiveness and efficiency within the supply chain.

Planning

Planning is the first step in a supply chain, and it is vital as well. Companies need to focus on planning the business model well through predictive technology and data acquired from research. They need to correctly forecast what the customers want to design their other processes like sourcing and manufacturing around it. The planning stage lays the foundation for the rest of the strategies to come.

Sourcing

After the planning stage comes sourcing. This stage includes identifying and hiring vendors and suppliers based on the predictions made in the last stage. The business has to contact suppliers who will provide them with quality materials to maintain customer satisfaction. Vendors also need to be hired so that the materials reach the manufacturers without being damaged. This stage is critical in the supply chain process.

Manufacturing

This stage is pretty self-explanatory. It involves manufacturers who are going to make the products that you intend to sell to your customers from the materials that have been acquired through sourcing. You have to keep an eye on this process as the manufacturing needs to be adequately controlled to the rise and fall in demand. Other than manufacturing, the inventory and packing process also happens in this stage. This stage is really integral to your supply chain process.

Shipping and Delivery

After the manufacturing and packing come the shipment and delivery of the product. This process needs to be fast and efficient as customers are directly linked to this stage. When the warehouse ships a product after packing it, it reaches a delivery center close to where the client wants it to be delivered. After that, a delivery agent is assigned to the package who finally delivers it to the end client.

You have to monitor this stage very closely since the products may get damaged or lost, or delivery delays can all happen at this stage. If you want your customer to be satisfied, you have to manage this stage well so that no problems arise in the process of delivery.

Returns

The final stage of the supply chain process is returns. A lot of the time, customers return the products for various reasons. They return it if they receive a damaged product or parts of the product are missing from the package. They may also return it if they no longer need the product. This stage needs to be monitored closely to categorize why customers return the products and work to make your system more efficient and customer-friendly.

Generic Supply Chain

A generic supply chain is the most basic form of the supply chain. They are not specified for any unique business field but just a model that shows the usual supply chain system from the beginning to the end. Even though a company’s supply chain begins with resourcing materials to manufacture the products, the process starts when the demand arises in the market for a particular product. Consumer demand is what drives the business in the first place.

After that, the company plans its whole supply chain, keeping its goals and strategies in mind. Then the process begins when based on the planning and data, they start to acquire materials for the manufacturers to make the products. Following that, the products go through the warehousing, packing, and transportation processes to finally reach the end customer. The generic supply chain is the most basic supply chain model that each business improves on depending on its business model.

The two main goals of any supply chain are its efficiency and responsiveness. Depending on each business’s goal and customer base, they decide which supply chain model to adopt for better customer service.

Supply Chain

Supply Chain for an E-commerce Company

The supply chain of an eCommerce company is vastly different from businesses that function from physical stores. Even though the sourcing and manufacturing processes are pretty much the same, the warehousing, packing, and transportation processes are vastly different. After manufacturing the product in a typical company, products are usually shipped to the physical stores from the inventories. There the customers can choose the products that they want to buy by looking at them and touching them. They immediately acquire the product after payment.

But in an eCommerce business, after the customer places an order, the order fulfillment process begins. The product is picked out from inventory and packed and labeled correctly in the fulfillment center or warehousing facility. After that, it is shipped and finally delivered to the customer within 1-3 business days. It is a complex process that includes a lot of entities and services. That is why it is essential to focus on this part of the supply chain process in your business.

happy african woman 3PL employee carrying boxes to her delivery van

Supply Chain Logistics

The supply chain is known as the backbone of our global trade. It is a complex process that connects many organizations and people in a chain of activities that need to be fulfilled for the client to receive the finished product.

The process includes factors like manufacturing, warehousing, inventory, and transportation. To control all of these independent entities to work in a single chain is no easy job and has a lot of logistical factors. The logistics can be a bit complicated to understand, but it is crucial to understand and control them well to have a smooth and fast supply chain.

The executives that overlook your supply chain management process need to choose the most effective transportation mode and manage the whole warehousing and inventory process well for your business to have a more efficient supply chain process. Analyzing and controlling the supply chain logistics is thus a significant part of your business.

Supply Chain
an warehouse employee moving inventory items and boxes

Benefits of Supply Chain Management

an warehouse employee moving inventory items and boxes

We have already discussed the importance of having an efficient supply chain management process in place. But what exactly are the benefits that the company can get from supply chain management efficiency? Firstly, it helps you develop a good relationship with your suppliers. This will help them become more collaborative with your business. It will also give you better quality control over your manufactured products to deliver only the best quality products to your customers and create a loyal customer base. It will also cut down your expenditure.

If your supply chain management team can properly plan and execute an efficient supply chain system, that would ensure you will pay less as inventory costs and overhead costs, which will, in the end, make your business more profitable. Your data analytics will also improve by leaps and bounds because the goal of SCP or Supply Chain Planning is to create a system that analyzes data to plan a supply chain that is best suited for your business. These experts will be able to provide you with an efficient plan for building your supply chain network.

But one of the most important benefits of a robust supply chain management system is that it can help you gain optimum customer satisfaction. An efficient supply chain management process will result in your supply chain also being more agile, efficient, and responsive. In the end, both the customers and you will benefit from it.

Supply Chain Planning

Supply Chain Planning or SCP is a process that might sound similar to supply chain management but in reality, is a lot different. SCP is only one part of the whole process of Supply Chain Management. Supply chain management or SCM refers to the process of managing the various components of the supply chain network so that they function smoothly and deliver utmost efficiency. Supply chain planning or SCP refers to the prediction planning of the entire supply chain based on the data available at hand.

This means that this is the initial stage of SCM where experts plan the whole supply chain. The process of this begins before the supply chain is even established. The supply chain planning experts collect and analyze all the data in hand to decide on the supply chain model they think will make the business function most efficiently. They go through processes like event planning, demand planning, inventory planning, transportation planning, strategic network designing, and many more to come up with the best supply chain solution for your company’s business.

It is the initial step of building a supply chain network for your company and thus very important. Make sure to use expert help and new-age software to develop the best supply chain plan so that you can rely on it in the future.

Supply Chain and Deflation

calculating for inventory tax and expenses

Economically, deflation happens when the prices of services and products fall below 0% due to the inflation rate. Most of the time, deflation is seen as a negative phenomenon for businesses. Since the falling prices of goods mean that expenditure will be less in the future than what they are under deflation. But as we move ahead in these technologically forward times, we see that deflation can be seen as a good thing in eCommerce.

In a supply chain network, the efficiency of moving products from one place to another has increased dramatically. But the cost of this efficient movement has gone down considerably, and this has allowed eCommerce businesses to sell the products to their customers at a lower price. So in supply chain efficiency, deflation can be seen positively.

calculating for inventory tax and expenses
robot arm placing boxes on a robot inside an automated warehouse

Supply Chain Execution

SCM or supply chain management can usually be broken down into two categories, the first is SCP, which we just discussed. The other part of it is known as supply chain execution or SCE. After the initial plan is established through SCP, the business needs to execute the plan through various entities and procedures, known as the supply chain execution. The two processes are closely related.

In the supply chain execution process, the company is more activity-related. They use all the assets and resources available to them to build an efficient supply chain that makes day-to-day decisions and manages all the problems in the supply chain network.

The process involves, amongst many other things, accurate product tracking so that the business is aware of any issues that may arise in the network. This process is very integral for the business. Because if the supply chain is not executed correctly, the chances of customer dissatisfaction increase significantly.

Conclusion

The supply chain is an integral part of any business, and many components work together in harmony to run it smoothly. Supply chain metrics, which refer to all of the logistical data we can find in a supply chain, must be analyzed and appropriately controlled if you want your supply chain to work well. That is why it is essential to do your research and put together a team of experts in the area who will be able to help you come up with your supply chain solutions. This is one of the most important things to remember as you start your eCommerce business.

Keep in mind that the market is constantly changing to meet the rising demands of the customers. Thus, your supply chain planning must be flexible and agile to accustom to those changes faster. That way, your business will be able to stay ahead of its competition and make sure that your customers are satisfied with your product and your service. 

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Frequently Asked Questions

The supply chain can be defined as the network that connects all the activities that a business needs to complete in order to deliver a product to its customer. Basically, it connects suppliers, manufacturers, shipment companies, and much more to the business. You can also define it as the system that links all the stages that a product has to go through before reaching the final customer.

There are many models of supply chains, each designed to suit specific types of businesses. There are six main models that we have discussed in this article. They are:

  • the continuous model
  • the agile model
  • the efficient model
  • the flexible model
  • the fast chain model
  • the custom-configured model.

A supply chain strategy or a supply chain management strategy is the plan that the supply chain management team of a business makes in order to achieve maximum efficiency in the supply chain process. The management team also needs to execute this strategy in order to make the supply chain smoother and more customer-friendly.

There are five main stages in any supply chain model. These stages are very important to analyze and control properly for your supply chain to work with utmost efficiency. 

    • Planning
    • Sourcing
    • Manufacturing or making 
    • Shipment and delivery 
    • Returns. 

There are three elements that are considered to be the foundation of any modern day eCommerce supply chain. They are:

    • Sourcing or Purchasing
    • Scheduling or Planning 
    • Delivery or Logistics 
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