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4 questions you need to ask about your supply chain

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The supply chain is the entire system of organization or process of producing and distributing goods to its consumers.

The management of the supply chain is critical to any business because it can reduce the cost of operating and increase your customer satisfaction. The proper management of the supply chain can also reduce the cost of production and purchasing of components or materials as well as speed up the cycle of production.

But to properly manage your supply chain 4 questions need to be answered by your business.
Let’s start.

1. Can we derisk it and if so, how?

There are two types of risks, predictable risk, and unpredictable risks. Before we can tackle the question of can we derisk it we must first understand the types of risks in any business.
Predictable risk is the type of risk that you can control and manage and the biggest factor for this type of risk is compliance when transporting these materials across different borders. The risk for this can be reduced to a minimum. To do that your business needs to focus on figuring out where it is legal to use and sell an item. Your business needs to be able to meet the regulations of the areas that you are crossing or selling in, to avoid possible penalties. You also need to find out the most efficient and legal way to ship your items and always consider that transporting goods will require documentation and additional checks.

Unpredictable risks are natural or big events that can interrupt a supply chain. These can be; natural disasters, and political or security changes. An example of a political change is Brexit in the UK while a security change can be trade amendments due to terrorism. Although you have no control over these external disruptions, you can reduce the risk of these changes to your business by creating and developing a disaster plan for your company.

2. What areas of the supply chain should we focus on?

There are several components to a supply chain that your company needs to manage and focus its efforts on, these are;

Purchasing – its main activity is providing any company with their needed resources or materials
Manufacturing – is the productions of products or items through the use of machines or labor
Inventory – its main function is maintaining the optimal number of items for sale.
Demand Management – Its primary activity is forecasting your customer demands to manage
the supply chain
Warehouse – Its task is to maintain and store all goods and items for use or sale
Transport – Its main activity is the movement of people and goods from one location to another
Within these components are critical key roles where you need to employ the right people with the right skill set.

These areas are dependent on each other and they must interact with one another efficiently to have a sustainable supply chain.

3. What is the value of a supply chain collaboration?

Supply chain collaboration is more than just cost-effectiveness or economic conveniences; they can be one key factor in sustainable long-term business. This can be done through;

  • A solidified buyer-supplier relationship that can be achieved by giving the buyer a consistent product or service based on value and quality.
  • Long-term supply chain collaboration which leads to lower costs over a routinized procurement of items or services over the life of the relationship.
  • Word of mouth through the buyer-supplier extended network.
  • Long-term innovative collaboration leads to the development of processes or products that can reduce cost and provide added value for its partners and customers.
  • Sustained lower inventory levels but higher turns of inventory items.
  • Reduced risks of supply interruptions to get ahead of your competitors
  • Sustainable competitiveness through agility and responsiveness

However, selecting the right partner for your business is also a critical task. A lot of businesses aim to partner or collaborate with big companies because they assume that there is great value in that action but that may not necessarily always be the case. A smaller partner will most likely invest more time and effort into the collaboration in comparison to a large supplier.
To efficiently approach which supplier you should collaborate with you should evaluate if there is enough potential in this collaboration to justify the effort in the collaborative venture. Next, all concerned companies should have enough strategic interest to support the collaboration effort. And lastly, does this supplier have the right processes and infrastructure for the growth of the collaborative investment.

4. What are alternative supply chains?

Alternatives or substitute supply chains refer to the use of a different supplier to satisfy the demand of the business.

Every resource or asset that a business uses in its products can be substituted by looking for high-performing, quality, less expensive materials that can work or be used as an alternative. It may not necessarily be a straightforward substitution for your current bill of materials however the substitutes or alternatives may provide superior performance overall in comparison to your current or regular supplier. Because of this, it is important to note that your business or company should keep a stable relationship with its suppliers, but it should not close the door to other possible suppliers as well, especially if the competing supplier has the potential for a better collaborative investment in terms of a long term partnership.

Looking into different suppliers and alternatives for the components of your products or services should be analyzed and evaluated efficiently. It should also be planned for you to reduce the risk of possible negative external threats to your business. It is a delicate balance, but it is still worth looking into.

Shivendra helps construction companies and contractors win more projects and grow profitably. Regarded as a master of practical implementation, Shivendra has guided organizations such as Downer and Siemens as well as smaller contractors to achieve double-digit improvements to their bottom line. Underpinning his extensive industry experience are qualifications in engineering and a Ph.D. focused on rapid cost improvement techniques. He is the author of two books, The Competitive Contractor and From Paper to Profit, host of the Competetive Contractor podcast, and the founder of Shivendra & Co and The Constructors Network. You can find more about Shivendra & Co on