Negosentro| The What and Why of the Supply Chain in 6 Steps |Every business depends on a supply chain in order to have the supplies they need to operate or the products they need to sell to consumers. Arranging a supply chain is therefore a crucial part of any business, but a supply chain is characterized by its multiple steps, each of which is a business in its own right. The businesses you’ll be interacting with depends on which step in the supply chain your own business represents. Here’s what you need to know.
The standard model for a supply line entails a manufacturer, a distributor and/or wholesaler, and a retailer. On the other hand, the MRO supply chain caters to businesses in need of parts and maintenance. Every business depends on a supply chain of some sort, including office buildings that require pens, paper, and other supplies in order to remain in operation. For the purposes of discussing supply chains, restaurants can also be considered retail businesses, and agriculture can be considered a form of manufacturing.
Manufacturing is the process of producing products from raw materials, and this forms the foundation of the supply chain. Manufacturing often takes place in factories in which automated processes do much of the heavy lifting. Occasionally, human workers will have a role to play in assembling parts, but the majority of labor on the part of workers is that of maintenance. For this reason, manufacturers also depend on a supply chain of their own. Likewise, a manufacturer may sometimes produce parts instead of whole products. There are myriad manufacturers that produce a wide variety of products and parts to meet any needs, each of which sells those products to other businesses at an affordable cost.
Distribution is the process by which products are purchased from manufacturers and sold to wholesalers and retailers. This part of the supply chain can be circumvented in order to save some money, but relying on distributors and wholesalers is common practice because of the concept of “value added” resale. This kind of resale entails providing additional services or other benefits in addition to simply selling the products to the next business in the chain. The value added varies on a case by case basis, but it tends to benefit the buyer and justifies the distributor making a profit by reselling products from a manufacturer to a retailer or wholesaler.
Wholesalers are similar to distributors in that they can be considered “middlemen” in the supply chain by virtue of not producing products or interacting with consumers. However, there are differences between the two that are worth consideration. For instance, wholesalers tend to take advantage of two key principles, namely buying in bulk for a discount and buying from a variety of distributors. This means that wholesalers tend to have larger and more varied inventories, making them ideal for supermarkets that tend to tell an assortment of very different products and in large amounts. For these reasons, wholesalers tend to be more beneficial than distributors for certain businesses.
Retail is the process of selling products to consumers, and this type of business is the most well known step of the supply chain. Retailers can buy products directly from manufacturers, which can be an ideal setup for small businesses buying locally. However, many depend on distributors and wholesalers for convenience and to get more bang for their buck, so to speak.
Arranging a Supply Chain
The supply chain of any business consists of multiple steps, but the business in question only has so much agency in the matter. For example, a retailer can choose where their stock comes from, but only insofar as choosing the distributor or wholesaler they buy from. Choosing a supply chain depends on finding a reliable source for your goods and knowing when to order your goods in order to get the most for your money and avoid running out of stock.
The supply chain is the backbone of commerce, as no one business can do it all. Finding the right partners for your supply chain requires some research and planning, but these tips have given you the tools to get started.