With global trade expanding at a staggering rate, supply chain management solutions have become an integral part of any well-oiled business machine. Regardless of your business’s size, without effective supply chain management, you cannot hope to strengthen your position on the market or improve your business performance.
Your customers demand products, and you need to deliver them in the shortest time possible. End-to-end supply chains are prompt, accurate, and cost-effective. If yours lacks even one of these criteria, perhaps it is time for supply chain optimization.
However, business supply chain optimization, proper inventory management and inventory optimization, as well as operations planning can be challenging, especially considering how many supply chain options are out there. Not every business is created equally, and therefore, not every business will have the same needs when it comes to material and product delivery.
Supply chain planning is crucial in making the right decisions and mapping out a supply chain network that will keep your business running smoothly. This is why you need to choose the right supply chain solution and supply chain partner.
Retail vs. Manufacturing
Retail and distribution businesses have different supply chain demands than manufacturers. They need to regularly replenish the supply of finished goods at their sale locations, while the manufacturers need to bring in raw materials for production. In the case of retailers, customer demand planning, management, and forecasting are primary drivers of the supply chain. At the same time, manufacturers have to take into account labor, machine efficiency, and raw material sourcing.
Some businesses deal with it all, meaning they require complex supply chains (end-to-end supply chains). What type of supply chain is the most suitable for you depends on a series of factors, the first of which is the location of your typical customer.
Do you deliver your orders directly to the customer, or do they come to you to pick their order up? Do you ship globally, internationally, or locally? These questions will determine the scope of the supply chain you need.
If you ship globally, you need to consider global supply chain management and logistics. Customs, freight forwarders, local regulations, and taxes – all of these need to be part of the equation. Don’t forget that you are going for the most cost-effective option possible. Airfreight is a lot faster than ocean freight, but it is a lot more expensive at the same time. Not many businesses can justify this type of investment.
On the other hand, if your customers are personally picking up their orders, inventory optimization and management need to be in top form. Think about whether you need a high or low inventory volume, and what you want your inventory turnover to be. This is also significant in relation to the supplier lead time.
Lead times represent how long it takes for the customer to receive their order from the moment they place it. If you promise fast delivery, you need a high inventory volume with low turns. This is also true if you have an extended supplier lead time with your suppliers, meaning it takes a longer time for your supplies (goods or materials) to arrive from your trading partners.
In contrast, if you’re dealing with perishable goods, such as frozen foods or fresh produce, you need high inventory volume and high inventory turnover so that you can easily replace any items that might have spoiled in the delivery process.
Depending on the size of your business network, your supply chain leaders may want to consider hiring logistics providers. Contract logistics companies handle the entire process, from production to the final point of delivery. This includes the company’s supply chain software solutions, warehouse management system, the distribution of goods, managing inventory, processing orders, and other current systems. You may not need something this extensive, but it is good to learn more about your options when it comes to logistics service providers.
- 1PL: First-party logistics means there are no middlemen. The parties involved are the manufacturer or supplier and the buyer. They have their own freight, cargo, and goods that need to be transported.
- 2PL: Second-party logistics providers have their own ships or airplanes. This type of provider is usually used for the international transportation of heavy cargo and wholesale goods.
- 3PL: Unlike second-party logistics, third-party logistics 3PL providers handle not only transportation management but also some additional services. These may include warehouse management, supply chain management, customs brokerage, terminal operations, and other services you need.
- 4PL: 4PL providers manage or oversee the entire company’s supply chain. They are considered lead logistics providers, often hired in conjunction with third-party logistics 3PL providers as consultants. Their primary role is that of an administrator, and they handle every aspect of the supply chain, including vendor management, introducing a master data management system, and more.
- 5PL: Lastly, 5PL providers take everything a step further. They are not asset-based (just like 4PL providers aren’t, either), and their supply chain solutions include negotiating better rates and saving money where possible.
Flexibility and Visibility
The two most important qualities are the company’s supply chain visibility and flexibility. Visibility is crucial in balancing customer demand and supplies, optimizing your business processes, managing global suppliers, and rapidly responding to disruptions in the supply chain.
Flexibility is determined by the type of market you’re competing in. If you’re a more niche-oriented brand, you may not have to pursue flexibility at all costs. But flexibility is just as important as visibility in quickly responding to short-term changes in customer demand or supplies. Your business will be better positioned to adapt to differences in product volume, delivery times, and other factors.
Choosing the right supply chain provider depends on your needs and budget. If you’re running a smaller business, there may not be a need for a 4PL or a 5PL provider. You may even be able to handle all the transport and inventory management yourself!
However, if your business is expanding, and you can’t possibly manage it all, looking into a logistics provider and a supply chain partner is a good idea.
Redbird Logistics Services, a professional and experienced third-party logistics (3PL) provider, will be more than happy to help you choose the right supply chain management solution for your business. We are an innovative, dependable company that will meet all of your logistics needs without fail. You don’t have to do everything yourself – contact us if you’d like a quote or have any supply chain questions you need answering. Don’t hesitate to reach out!