Lesson 10: Supply Chains

What You’ll Learn: Supply chains aren’t just for mega-corporations. Every business large and small has a supply chain in one form or another and maximizing its efficiency, flexibility and redundancy is essential to your success. We’ll show you how to build a chain that supports your current and emerging needs, ensuring that it will grow and mature as your business does.

Supply Chains (continued)

Managing Your Supply Chain

In the beginning, you may find a supplier or a couple of suppliers who helped you realize your dream of operating a successful business. They helped you build your product line and may have offered attractive terms upfront or provided additional support.

Yes, loyalty is important in business, but you can’t let it get in the way of smart business decisions. In the interest of maintaining the relationship, you may have forgiven a late delivery, poor quality or an unexpected increase in prices. But as your business grows, you want to make sure that you regularly assess your supply chain to ensure it is still performing for you.

Every year or two, you should conduct a sourcing exercise. This means that you look at other potential suppliers and solicit their ideas about how you can make your business more competitive, whether it’s in fulfillment, pricing, inventory control, selection or quality. If you like, you can include your current supplier in this exercise. If they catch wind that you’re looking at their competitors, they may offer to renegotiate pricing and terms as you conduct your search.

One of the keys to managing suppliers is to keep accurate records of some of the activities noted above. You want to be able to document changes to your service, pricing, quality and fulfillment.

Lead times

One thing that new businesses often overlook is lead times. Time is money. Orders that are waiting to be filled and inventory sitting on shelves are costly. Ideally, you want to have as little stock on hand as possible to fill orders and a short enough lead time so that you can get new parts, supplies or products when you start to run low.

In working with your suppliers, find out what the lead times are, not only for your orders, but the lead times they have to get raw materials, parts or products from their suppliers. Get them to quote you lead times that mean the items are in-hand on your end. A vague promise of two weeks may not include the time it takes to ship it to you or produce it.

The same is true with your customers. As their supplier, you need to factor in the total lead time when you are confirming a delivery date. You need to add in your own internal processes as well as packaging and shipping to come up with the answer. Remember: Few customers will be unhappy that an order arrived early, but the ones who are left waiting will either complain about you to others or take their business elsewhere.