Why is a Supply Chain so Important?
Understanding why a supply chain is so important can easily be illustrated by the recent issue at The Oscars. The wrong person was given the wrong item and chaos ensued, with embarrassed film stars and “La La Land” being announced the winner of the best picture when it was actually “Moonlight”.
It is important to understand the difference between supply chain and logistics.
A supply chain is a network of people, organisations, activities and data involved in getting a service or product from supplier to customer.
A basic supply chain structure is as simple as
- Supplier (raw materials)
Logistics is about getting the right product, to the right customer, in the right quantity, in the right condition, at the right place, at the right time and at the right cost – the seven Rs of Logistics.*
Logistics are the activities that take place and the supply chain is the network of companies that work together and coordinate their actions to ensure a product or service is delivered to the customer.
There are certain things that are imperative to a successful Supply Chain:
- Stock – Whether you are at the beginning of the chain supplying the raw materials to a manufacturer, or whether you are the retailer providing a specific finished item to a customer, understanding where your stock is and how much stock you have is crucial.
- Data – the flow of data from one part of the chain to the next is crucial, if all parts of the supply chain have the same data at the same time the increased efficiency of information will reduce errors and ultimately save costs from wastage.
- Delivery – if you have committed to a customer or the next part of the supply chain make sure you can deliver – literally.
- Finances – not keeping on top of transportation, labour and distribution costs can impact on the whole supply chain.
By having a successful supply chain you will increase customer service levels because the next part of the chain is getting the right product at the right time. Another knock on effect is an improved bottom line as there will be less wastage as you know who needs what and when. The alternative is giving the wrong thing to the wrong person and potentially losing customers, profits and being left red faced just like some certain film stars at the Oscars.
*quote courtesy of Supply Chain Management: A Logistics Perspective by John J Coyle et al