Leaders win through logistics. Vision, sure. Strategy, yes. But when you go to war, you need to have both toilet paper and bullets at the right place at the right time. In other words, you must win through superior logistics.
Tom Peters, Quotes from Universal Cargo
I find this quote pretty amusing. Sure, it might sound a bit silly, but rest assured, the key to your business’s success rests heavily in logistics. Logistics, or more broadly, supply chain management, makes up a massive part of business success. This quote highlights how important the coordination of goods from conception to delivery is.
Essentially, the supply chain is what gets your product into your customer’s hands as fast and efficiently as possible. This task keeps getting more difficult, as demands for faster shipping are only going up as we trek through COVID-19’s wake.
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Understanding the supply chain and how you can master it is vital to the success of your small business. I’m sure that if you aren’t familiar with logistics, the thought of it coupled with supply chain management probably leaves you shuddering in fear… It can be incredibly overwhelming!
Fear not! This week, we are going over the supply chain, and going deeper into the question of why is logistics important?
Let’s get going.
What is the Supply Chain?
A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps it takes to get the product or service from its original state to the customer.
Investopedia definition of “supply chain” by Will Kenton
When you think of “logistics” and “the supply chain”, understand that these items go hand in hand. The supply chain is the overarching series of processes that get the product from the manufacturer to your customer’s hands. Logistics is the management of these goods in an efficient, effective way.
Having a grip on supply chain management and especially logistics is paramount to your business’s success. You want your products to get to your customers quickly, safely, and as smoothly as possible. To ensure that this process is functioning as optimally as possible, you need to have the right supply chain to fit your needs.
The 9 Parts of the Supply Chain
But let’s break this down a little further. As we see it, there are nine basic parts to the supply chain:
- Planning for demand: estimating how many items you will sell and what you need to get them made and delivered to the customer.
- Sourcing materials: finding the raw materials needed to make a product.
- Managing inventory: keeping track of raw materials, works in process, and finished goods.
- Manufacturing and production: turning raw materials into sellable goods.
- Transportation of goods: taking goods from the manufacturer to a shipping warehouse.
- Warehousing and distribution: storing goods and shipping them out, either to customers or distribution channels, as needed.
- Order fulfillment: shipping orders to individual customers or retailers.
- Returns management: handling customer returns.
- Customer experience: making sure the entire process feels seamless.
Parts 5 through 8 in this process can be considered “logistics.”
A Real-Life Example of a Supply Chain
Still a little confused about this whole process?
Let’s take a look at a real-life example of a clothing company with a fantastic supply chain, Zara…
Zara is one of the main clothing and accessory retailers internationally based in Spain. They are mainly focused on new, trendy and cutting edge fashion for men and women alike. Currently it operates in 88 different markets worldwide, their main distributors are in Madrid and Zaragoza.
Zara is known for its energy saving efforts and techniques, as well as their minimization and efficient waste management. This commitment with the environment is paramount within their operations across all plants and departments and has helped create a collective conservation consciousness among members of the staff.
In their fabrics, they used environmentally friendly fabrics like organic cotton amongst others. Their textile production comes from Spain, the Far East, India and Morocco. Biodiesel fuel is used to transport their products, according to their environmental policies.
They have a great concern for animal treatment and under no circumstances, use animal products that come from animals that were not treated ethically or sacrificed for the sole purpose of commercializing their leather, skin, horns, feathers, etc.
While other retailers use third-party production, Zara produces about 60% of the fabrics they use and use cutting-edge technology to cut and measure the handling of fabric so this is done in a precise and efficient manner, thus reducing waste overall.
5 Examples Of Some of the best Supply Chain Management by David Kiger
Breaking this down further, you can see just how complex Zara’s supply chain is. This is a very large-scale example of the importance of a thoughtfully constructed supply chain.
After reading about what makes up Zara’s production, do you think that in order to keep that ship running, they have to hire the right people, communicate regularly, and ensure that all processes are running as efficiently and effectively as possible?
Absolutely.
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Why the Supply Chain Matters
Supply chain management helps you make sure that your product makes it to your customer on time. Sadly, that window of time to get your product from its creation to the hands of the customer is seeming shorter and shorter. More people than ever before have been shopping online, and due to this new norm, people want fast and reliable shipping for whatever it is that they are ordering.
In order to make fast shipping a reality, you need to consider shipping speed when crafting your supply chain. Coordination throughout your supply chain is a must, and the more smoothly your chain is functioning, the happier your customers will be!
Keeping track of where your goods are, the status of them when your customers can expect them, and so on, are all necessary to keep your supply chain functioning smoothly. When your operation is running smoothly, your customers will stay happy!
I don’t know about you, but when I order something online, I want to know exactly where it is at when it will get delivered, and any possible issues with the shipping process. Good communication is the key to keeping people like me happy and satisfied with the order process.
Struggling with Supply Chain Management?
Supply chain management can seem overwhelming, especially if you are in the process of getting your small business off the ground… Thankfully, there are several steps that you can take to ensure that your supply chain is functioning as smoothly as possible.
Take what Bic Magazine shared for example,
Customer satisfaction is the end goal of any logistics chain since it affects how your company is viewed. The time it takes from order placement to delivery is one of the most crucial aspects of the customer experience and the primary deciding factor in their opinion of your company.
It doesn’t matter how well you handle every other aspect of your business operations if your customer’s opinion is affected by long lead times in order fulfillment. Since a number of departments and staff members are involved, improving lead times may require you to deal with the order fulfillment process as a whole.
When working to improve your supply chain, this is the time to be analytical and really dig deep into what is working for your business and what is not. Find the processes that might need some attention, or that customers are seeing the most frustration from, and work from there on to address these issues. Listening to your audience and their needs is a great way to keep yourself in check, and make sure you are putting the customer first.
Useful Resources
To help you on your journey to provide customers with a better experience, I’ll leave you with a handful of useful resources to get started.
Need help planning for demand? Check out my colleague’s post on the Fulfillrite blog. It contains a lot of practical advice on how to do this.
Looking for raw materials? Check out Concentric’s Source-to-Pay software. If that’s not quite what you’re looking for, consider asking your manufacturer to help you source raw materials.
Speaking of manufacturing, if you’re looking to find manufacturers, here are a few resources:
Need help tracking inventory, warehousing, distribution, and returns? Look into a third-party logistics company. We can personally vouch for our client, Fulfillrite, as well as for larger companies like ShipMonk and ShipBob.
Need help with freight shipping or transportation with goods? Freightos is the way to go. They’ll help you find the right carriers to get your goods from Point A to Point B.
Final Thoughts
Not as scary once you spell it all out, right?
Supply chain management is a vital part of any business, and getting it right can 100% be tricky. If you are looking for the key takeaways, remember:
- Listen to your customers.
- Optimize your supply chain’s processes.
- Analyze what you are doing that is working and that is not.
- Try to make your supply chain function as efficiently and smoothly as possible.
If you keep these goals at the front of your mind, your business with run more smoothly and your customers will thank you for it.
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