Supply and Demand: Links to Success
Supply chain management is the management of the flow of goods and services. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. It's a key component in the manufacturing process — benefiting both small and large businesses alike.
Many manufacturers across the country have integrated their suppliers into their Enterprise Resource Planning systems (ERP). This allows them to view important elements of the process including production schedules and order requests. Manufacturers frequently do this to even out the fluctuation within their supply chain and cut down the time it takes suppliers to respond to changes in demand. After all, a sudden, rapid increase in demand for a product can cause a severe shortage in supplies, late delivery of products and ultimately scores of unhappy customers.
There are several things businesses can do to help manage their supply chain more efficiently including:
1. Implementing a Kanban system, a special inventory control process. This low-tech approach
requires place cards with all relevant product information within your inventory. When you reach
the card placed before the end of the stock you are depleting, you have all the information
required to reorder supplies. Having your suppliers visit your facility to manage the items they are
responsible for can ultimately reduce labor costs, too.
2. A high-tech version of the Kanban system utilizes a computerized inventory tracking system.
These systems can be set up by you or your supplier. Every time an item is pulled, an
electronic message is sent to your purchasing staff or your supplier and a replacement part is
sent to your facility. Best of all, you can even customize reorder amounts.
3. Establishing consignment agreements can reduce inventory costs as well. There are multiple
ways to handle this either by setting up consignment on a monthly expense basis or by paying
a predetermined percentage of cost when the goods are received. You can even pay as you
use the goods.
4. Having a company manage your inventory, also known as Vendor Managed Inventory (VMI), is
beneficial. Their involvement can vary greatly, from offering storage solutions to certifying your
entire supply chain.
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