Understanding the Pros and Cons of the Supply Chain

Industry forms the bedrock of society, as it provides myriad essential products that people use to live their day to day lives. However, businesses themselves also need to be supplied with various items in order to function. The process by which businesses obtain the items they need is referred to as the supply chain, and the supply chain is a crucial part of any business. Here’s what you need to know about shipping and/or receiving the products that keep businesses operating efficiently.

Manufacturing

Manufacturing is the process and practice of turning raw materials into usable products. This process is typically done via machines in factories, though this varies from one item to another. For example, produce would instead originate on a farm. In many cases, a manufacturer will produce completed products that are built and assembled on site, but they also produce specialized parts used in complex machines like cars, for example. Likewise, a farmer will produce whole fruit, vegetables, and/or animal products before shipping them to processing plants to be transformed into a discreet product. It’s worth noting that while manufacturing is the starting point of a given supply chain, manufacturers may need to be supplied by a distinct supply chain. For example, industrial or farm equipment are examples of the aforementioned complex machinery, and that kind of machinery needs maintenance and repairs that hinge on parts and even professional mechanics.

Distribution

Distribution is the process by which goods get from their point of origin to their final destination. This task is typically performed by cargo vehicles like freight ships and cargo aircrafts, and these also require maintenance. This means that in some cases a distributor will need the same products that they are charged with delivering to others. Freight factoring is an increasingly popular part of maintaining the budget for repair and fuel costs in lieu of waiting for invoices to be paid by clients, a process that can take some time. Fuel usage also varies tremendously based on the weight of the vehicle and its cargo, which means that freight vehicles consume much more fuel than the majority of vehicles, making them much more costly. This cost is heavily offset by the process of delivering in bulk, however, which is an almost universal practice. Distribution is sometimes seen as an unnecessary “middle man” that can be circumvented, which is why most distributors are value added distributors, which means that they provide additional services or other benefits that incentives the use of distribution, rather than buying directly from a manufacturer.

Wholesalers

Wholesalers present an alternative for both retailers and distributors as to who they buy their products from and sell them to, respectively. Wholesalers sell products to retailers in much the same way distributors do, and they buy from distributors in the same way that retailers do. Wholesalers tend to buy in large quantities in order to benefit from bulk discounts offered by distributors, and they often take full advantage of the wide range of products available from one or more distributors in order to give themselves as many sales opportunities as possible from a variety of retail outfits. However, this bulk buying methodology works best with non perishable goods, which places a limit on the profit a wholesaler can make and the usefulness of a given wholesaler to a given retailer.

Retail

Retail is the final part of the supply chain, and that’s assuming the products are meant to be sold. In some cases, there is no retail destination, and the supply chain stops at distribution. In the vast majority of cases, however, products are manufactured and distributed for the purpose of selling them to the public. A retailer depends on manufacturers and distributors not only because they do not typically produce their own goods, but also because they can and often do buy products from several distributors. This is the case for a supermarket like Walmart that provides a wide assortment of products of various types and brands, for example. As mentioned above, it is possible to circumvent distributors, but this isn’t recommended due to the added value from most reputable vendors. However, be careful when choosing a distributor, because you may find a rare example of a situation in which avoiding a distributor is the right call for your business. It’s also worth noting that many businesses that aren’t retail companies still sell products that are provided by a supply chain, and one example of this would be a restaurant. Some restaurants produce some of their own goods on site, but this is almost universally too expensive by virtue of requiring additional space, equipment, and employees.

Supply chains are a crucial part of doing business, and that makes them crucial for the human experience. There truly is no one stop shop, and that’s even more true when one considers the necessity of the supply chain. With these tips in mind, you’re prepared to participate in this chain, regardless of which link describes your business.