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Understanding the 4 Basics of Supply Chain

Tony Brian by Tony Brian
July 29, 2022
in Education

A supply chain is the flow of goods and services and includes all processes involved in transforming raw materials into the final product. It is a multidisciplinary aspect of business that has become automated due to globalization. However, it is still a complicated process and requires the services of a skilled manager to ensure its smooth functioning.

Understanding the 4 Basics of Supply Chain

An efficient and effective supply chain is crucial for the growth of a business. Designing a strong supply chain and managing it effectively to achieve the best results is equally crucial for the success of a business. In a supply chain, each process depends on the other to provide a seamless pathway. The supply chain managers ensure that the processes are streamlined and the overall processes run smoothly. 

Supply and demand are two essential factors of a business. Supply chain managers study the demand and supply trends to design efficient supply chains and achieve better results.

The popularity and demand for supply chain managers have led many universities to offer this course. MBA in supply chain management degree is designed to include general business administration courses and specialized courses in supply chain management. It is primarily a two-year degree program but some universities offer a one-year accelerated program as well.

The University of Wisconsin offers one such accelerated, affordable, and convenient program. Supply chain managers are also in demand and have a brilliant career outlook. Therefore, if you plan to become a supply chain manager, earn your supply chain management MBA fast to reap the benefits of this flourishing career pathway.

A supply chain is a complicated concept but all supply chains have four core elements, which should work cohesively to benefit the business. In this article, we will discuss the four basics of a supply chain.

1. Integration

Planning is essential for the long-term success of any project. Integration is a part of planning and ensures that everyone involved in the manufacturing process efficiently communicates and collaborates. This phase of the supply chain starts with strategic planning and is monitored throughout to ensure effective information sharing and data analysis. The key component of integration includes data, its collection, storage, and use to improve a supply chain.

Integration essentially provides a single-view and accurate source of information on supply chain activities while reducing human error, shortages, delays, and over or under-stocking. Hence, this allows managers to better plan for and solve any supply chain issues.

The use of new software and artificial intelligence tools to ensure efficient communication between departments reduces errors and helps save time and money. Updated technologies allow you to integrate your entire supply chain solutions while being flexible enough to change and grow with the business.

2. Operations

Supply chain operations, often referred to as logistics, coordinate specific day-to-day operations of the company. As day-to-day operations are the backbone of a company, managers monitor them and ensure that all operations are on track. Moreover, operations are evaluated to observe and identify areas of improvement. For example, managers constantly monitor equipment to get the most out of it and cut back on work hours when production slows down.

Operations predict the production of a company. They help keep an eye on company inventory as they help predict which supplies will be needed and by whom. Moreover, operations help predict any interruptions in the supply chain, and dealing with these interruptions beforehand can reduce their impact on the business while increasing profit. Efficient software can help align operations with the rest of the business processes.

Inefficient supply chain operations will lead you to lose on opportunity costs, scale, and specialization. Meanwhile, efficient operations ensure that everything is running smoothly to maximize benefits and increase the company’s output.

3. Purchasing

As evident from the name, purchasing means the purchase of raw materials or other goods needed to generate the company’s products. It helps create relationships with suppliers to identify and source good quality necessary items in required quantities—a crucial step in purchasing to adhere to high-quality standards while maintaining a cost-effective budget for the company.

Businesses manage external suppliers to source raw materials and services so that they can focus solely on their specializations. Without the right purchasing personnel, the company can run out of materials which will delay production. They can also lead to overbuying, which strains the company’s budget.  

4. Distribution

Distribution is the end process of a supply chain. It means that the product reaches the store shelves for the customers to buy. The distribution of products requires an efficient shipping system. Some companies use logistics software to manage shipments, while others outsource this process to a third-party provider.

Distribution mainly involves dealing with transport services, warehouse owners, delivery companies, and other related operations. This element of the supdply chain can be simplified and optimized to ensure better client service and reduced operating costs. It is recommended to centralize the distribution process to monitor inventory, stock location, the order status in real-time.

The Bottom Line

A supply chain is an integral part of a business. It has four essential elements which work together to ensure that the business runs smoothly. Integration ensures clear and effective communication between everyone involved. Operations are day-to-day specific tasks that must be completed for seamless production of company products.

Purchasing is the purchase of required raw materials and services that meet the standards of quality while maintaining the company’s budget. Distribution is the last element in a supply chain. It ensures that the final product or service reaches the customer in good shape and at the right time. 

A supply chain manager ensures that all these elements work together in harmony to strengthen the supply chain. Hopefully, this article will help you understand the four basics of a supply chain.  

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