Supply Chain 101 - The Basics: Customers and Suppliers

Business Advisors

By Richard McKenna

Every business has a supply chain, and to achieve your goals and greater profitability, you need to know all of the members of your supply chain. Those members include your customers, suppliers and you„Ÿinter-related organizations that depend on each other to be successful. With a cohesive, integrated supply chain, you, your customers and suppliers will be well positioned for success.

Where to Start?

An efficient supply chain strategy starts with you and your employees. Everyone, from the CEO down, needs to understand the business and the role of the supply chain, and recognize the opportunities to develop and continuously improve the supply chain. Critical strategic decisions defining your business model must all be made with an eye on improving the supply chain.

The Customers

Customers are the most important element of the supply chain. Working with your customers, you can implement various strategies that help you reduce inventory, improve productivity, reduce lead times, decrease waste and improve customer quality.

An effective supply chain includes customers who will provide forecasts of demand or will share their sales data with you so you know. This will allow you to best plan to replenish their stock because you’ll know what’s selling.

The Suppliers

It is essential that all critical suppliers are involved in developing your supply chain management strategy. Each critical supplier must understand how you run your business and must contribute to support that vision. Communication is essential. Your suppliers must work with you to keep inventory low, increase productivity, reduce lead times, and reduce rework and scrap. Building an extra cushion of material in your warehouses or on your shop floor may be acceptable in some settings, but as a rule, should be minimized.

Collaboration is the Key

The collaborative efforts of your customers, your suppliers and your own organization are the most important elements of a supply chain strategy. All three groups have vested interests in each other’s success. With shared goals and a shared vision for the future, your customers, your suppliers and your organization will have a supply chain strategy that achieves results.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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