A product will almost never make the journey from its point of manufacture to a customer’s door. Instead, there are usually several steps in the process, including being transported to suppliers, held in storage in various locations (such as warehouses), processed in distribution centers, and/or transferred to transportation facilities before finally reaching the consumer. If you have an effectively managed supply chain network, it will allow you to move products efficiently through each of these areas. In addition to reducing the length of time it takes for products to arrive at the consumer, an effective supply chain network will also save you money.

Success in utilizing these connections is vital for a business’s daily functions. These connections affect your inventory levels, the time required to get your products into the hands of your customers and whether you are able to satisfy customer demands.

What Makes Up a Supply Chain Network?

A supply chain network includes all individuals, locations and processes used to take products from the raw material state to the final shipped location.

Its main components consist of:

  • Suppliers: Provide raw materials, parts, as well as finished goods.
  • Manufacturers: Products are made from materials.
  • Warehouses: Store products till time they need to be stored.
  • Distribution centers: Delivery orders are sorted and prepared.
  • Transport providers: Move products from the locations to the required customers.

Every single aspect relies upon all of the other aspects. An interruption in any one part will have a negative impact on the whole system.

How Network Connections Affect Performance

The structure of a network can shape business results in several ways.

Delivery Speed

When a business has warehouses near their customers, it will allow them to deliver products more quickly. This can be beneficial for companies who have rapid shipping capabilities, or those who are serving very large geographic areas.

Operating Costs

The quantity and where those locations are located will impact your rent, labor, inventory, and transportation expenses. Having a large number of facility locations within a network could result in a waste of resources; however, having very few facility locations within a network could lead to increased costs for delivering products.

Stock Availability

Good inventory planning places your products at locations with the highest demand. By doing this you can decrease the number of out-of-stock items, while also reducing the amount of excess inventory being held in any single location.

Business Resilience

A single supplier or transportation route for your business could lead to major delays in delivery times if anything goes wrong. You will need to consider using other suppliers and/or transportation routes so that your products continue to be delivered.

Building a Network That Works

Before making any changes to your existing business network, take time to review it. To begin with, map out each of your supplier’s locations, facility locations, route of transportation for products/services and the locations of your customers.

  • Order volume and demand patterns.
  • Transport and storage costs.
  • Delivery times and service targets.
  • Supplier reliability and capacity.

The information allows for comparison of potential solutions to fill existing gaps. In addition, the use of planning software can allow for modeling of multiple scenarios prior to making an investment in new facility construction.

Keep the Network Ready for Change

A supply chain network that is flexible enough to accommodate shifts in customer demand, rising fuel costs, and changing supplier capacities will be successful.

Regular reviews allow businesses to identify potential problems, enhance productivity, and enable expansion. With each connection functioning effectively, products will be delivered to customers more consistently, and the business can perform more confidently when competing.