What Is a Supply Chain? How Can It Be Improved?

By
Chris Layne
September 28, 2016

If you’re involved in any kind of B2B transactions on a regular basis you’ve probably heard the term supply chain. You’re probably also familiar with some of the ideas that underly supply chain management. In an age of increasing automation, integration, and cross-company communication, you should establish an effective strategy to optimize the efficiency of your supply chain. So, what is a supply chain? In this post we’re going define the term supply chain while also looking at some key ways you can improve your own supply chain management processes.

What is a supply chain?

Generally, a supply chain is a network of companies that work with each other to create and distribute a specific product or group of products. Supply chains can be viewed as the journey of a single product from inception (manufacturer) to consumption (retailer). Alternatively, supply chains can also be understood as part of a broader, interacting network. Manufacturers, for example, usually supply a number of goods to different suppliers, who will then cater to a variety of retailers, contributing to numerous supply chains in the process. Supply chain management is the set of practices that a company undertakes to optimize and streamline its own supply chain. Supply chain management uses information from third parties to optimize internal processes directly linked to separate supply chain elements while also influencing processes outside the scope of company operations as much as possible. Many distributors, for example, will work closely with logistics companies to improve delivery speed.

How can you improve your supply chain?

Now that you've answered the question, "What is a supply chain?", it's important to know that collaboration lies at the heart of effective supply chain management. In order to be able to achieve an overview of the flow of products, information, and finances, working communication channels should be established between otherwise disparate parts of the supply chain. Doing so will allow you to manage and control processes outside the bounds of those for which your own company is responsible or within the extended enterprise. 1. Clarify goals. In order to gauge the effectiveness of your current supply chain strategy it’s important to evaluate it in terms of your own company benchmarks as well as outside indicators. Marketing data from your customers should form the basis of any strategic goals, encompassing unique customer needs, pain points, and possible opportunities for competitive advantages. Communication of data and information between different parts of the supply chain is equally important in this regard. In order to be able to account for potential fluctuations in demand or supply, manufacturers need to be just as willing as retailers to share their customer data. If one of your internal goals, for example, is to improve transparency at all stages of the supply chain, then you should evaluate your current suppliers on this metric. 2. Foster automated data channels. The free flow of information allows all companies in the supply chain to manage and allocate resources based on knowledge about fluctuations and changes in production and the movement of goods. As tailored legacy systems become outdated, the push towards standardization and integration of company platforms, such as eCommerce portals and “smart” machinery, means that companies can now automate data sharing almost instantly. One area where this is may be the most obvious is in logistics, in which information about the location and movement of products is available all the way up the supply chain. 3. Use data insights. Decisions regarding supply chain management should be driven by data insights. For example, effective demand forecasting can improve the efficiency of the supply chain at all stages, and information from retailers about planned promotions and initiatives can be used to allocate future resources within the extended enterprise. One of the best ways for companies within a supply chain to gain a competitive advantage is through the timely sharing of industry-sensitive information. Elements throughout the supply chain will benefit from the insights that this kind of assimilation can provide. Expected inadequacies or surpluses at the manufacturer level, for instance, can translate into possible opportunities for retailers, which will in turn affect distributors and suppliers. 4. Collaborate and review regularly. Even though it’s not always possible to centrally manage supply chains that involve numerous companies at different stages of production, closer collaboration and review should always be the goal. According to the University of Tennessee’s Global Supply Institute, the presence of silos, individual companies or stages of the supply chain with poor cross-company communication, is one of the most disruptive factors facing those responsible for effective supply chain management. One of the easiest ways of ensuring long-term consistent collaboration is regularly reviewing broad supply chain strategy with all involved companies. How do you answer the question, "What is a supply chain?" Let us know in the comments.