The supply chain encompasses all of the activities that are associated with the creation and distribution of an asset or commodity. Supply chain management is the management of those activities.
Many make the mistake of attributing effective supply chain management to the actions that ensure the customer receives the product. That is, they focus supply chain management activities predominately on the warehousing and distribution of the product to the customer. This is a very important activity as it relates to profitability, after all, how can you make a profit if you cannot provide the product? However, supply chain management is not singularly focused on the receipt of goods and the transfer of those goods to the next link in the supply chain. Effective supply chain management encompasses an understanding of the complete supply chain from raw material to final product.
Effective supply chain managers understand the full extent of the supply chain in which they operate. They understand all of the links within the chain that have a direct activity associated with the product lifecycle. This allows the supply chain manager to accurately assess the viability of the supply chain.
Supply chain viability is important to the long-term success of any organization. If an organization relies on a very limited number of firms within the supply chain to produce products, then the organization could realize increased risk. Since the economy plays a major role in the viability of the supply chain; if one of those very limited number of firms happens to fail, then the organization that relies on the failed firm will be negatively affected. Generally speaking, the organization will not fail, unless the firm that failed was so niche that there is no replacement firm within the supply chain. However, this failure will have a negative effect on the organization that could ultimately affect the price point of the product. This predominantly stems from the fact that the costs associated with the supply chain could rise, which would ultimately equate to a rise in the price of the product to maintain profitability.
Managing a supply chain is really about managing a network. Supply chain managers must understand their position in that network and the status of the firms that are inextricably linked within that network. This will help the supply chain manager assess risk and determine the viability of the supply chain and the ability of the firms within the supply chain to support long term operations.
Allen Consulting Group is experienced in effective supply chain management. Reach out today to learn more about our ability to serve your needs and help you manage your supply chain to meet strategic growth requirements.
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