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How to create a supply chain

If you’re setting up a new business, chances are you’ll want to know how to create a supply chain. Making sure you have an efficient supply chain can be the difference between having a successful or failing business.

In this guide, we look at how to create a supply chain in the UK, as well as looking at what a supply chain is and tips for supply chain management.

What is a supply chain?

A supply chain is basically the network of manufacturers, suppliers, distributors, businesses and other resources that are needed in order to deliver a product or service to the end customer.

As a tradesperson in the UK, your supply chain could look something like this:

  • Step 1 – A supplier sources raw materials
  • Step 2 – Manufacturers buy raw materials and use them to make products
  • Step 3 – Distributors buy products from manufacturers
  • Step 4 – Retailers buy products from the distributors
  • Step 5 – You buy products from local retailers
  • Step 6 – Your customers buy products or services from your business

Depending on the nature of your business, you could sit in the middle or end of a supply chain. For example, if you have a shop then the retail service you offer will sit at the end of a supply chain.

Why do we need a supply chain?

There are two main functions of a supply chain:

  1. To bring your business the materials and/or services that you need to produce your own products and services.
  2. To allow you to deliver your own products and services onwards to your customers, which could be other businesses or end consumers.

What is a supply chain

What is supply chain management?

Supply chain management refers to the process of setting up and maintaining a supply chain. The goal of supply chain management is to ensure that all parts of the chain work together as efficiently as possible.

An efficient supply chain is key to the success of your business, as it will dictate how quickly and efficiently you can deliver goods and services to your customers.

A well-oiled supply chain could give you a much-needed competitive advantage over your competitors and will make you less vulnerable to certain risks.

The goals of supply chain management

When you’re developing and managing a supply chain for your business, you essentially want to be able to:

  • Make production and supply of goods as cost-effective as possible
  • Respond quickly to any changes in demand for the products or services you offer to your customers
  • React speedily to any issues that might occur at any point along the supply chain

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How do you develop a supply chain?

Here is an overview of the five steps to help you create a successful supply chain:

  1. Identify what you need from your supply chain by listing all the resources that you need to deliver your products or services to your customers.
  2. Create a supply chain plan that maps out what your business will need over the next 2-3 years.
  3. Research the partner businesses you’ll need to see what options you have that might suit your supply chain needs.
  4. Choose suppliers that can meet the needs of your business, i.e. they can provide products or services that you can afford and within a timeline that works for your business.

A sudden growth opportunity is often one of the biggest risks to a supply chain, and your business. Therefore, you want to choose suppliers that have the capacity for growth in the future, should the need arise.

Supply chain management plan – example questions to ask yourself

When putting together your supply change management plan and looking for the best business suppliers, it’s helpful to ask yourself a few questions:

  • Will their costs allow you to make a profit? You want to keep an eye on your profit margins so that the costs you’re paying are worth it in terms of quantity and/or quality.
  • Do they have enough capacity for now and future growth? Make sure the supplier has the capacity to meet your current needs but is also flexible enough to respond to a sudden increase in demand.
  • Are they a dependable business that you can rely on? An efficient supply chain relies on the dependability and continuity of all links in the chain.
  • Do you have a backup? It’s often a good idea to look at alternative options so that you have a backup business should anything go wrong within the existing supply chain.

What is supply chain management

What are supply chain diagrams?

Supply chain diagrams, often referred to as supply chain flow charts, are a popular way of showing all the steps and players involved in a supply chain. Creating a diagram or flow chart that maps out the whole supply chain can help you get to grips with and manage all the various elements.

A supply chain diagram should include the following key elements:

  • Supply – Identify the raw materials, natural resources and any other basic components that sit at the top of the supply chain.
  • Manufacturing – Include the businesses that source the raw materials and create products. You might even include transportation and storage stages as part of the manufacturing process.
  • Distribution – This is typically the final stage of the supply chain and where/how products or services reach the end user.

Supply chain strategy examples

A supply chain strategy is another term that refers to the overarching plan that a business uses to manage the flow of goods and services through the supply chain.

Here are three popular types of supply chain strategies used by businesses:

1. Demand-driven supply chain strategy

This strategy focuses on reviewing past customer demand to meet the demand from customers in the future and plan the supply chain accordingly. This demand-driven approach will allow your business to meet customer demand, but it can be time-consuming to get the figures right. It also leaves your business open to the risk of changes in customer behaviour and demand.

2. Agile supply chain strategy

Adopting an agile supply chain strategy means you’re focusing on flexibility and being able to react to changes in supply and/or demand, e.g. material availability, seasonality, or changes in customer behaviour. An agile supply chain strategy typically works well if you’re dealing with products or services that change quickly or have a short lifespan.

3. Collaborative supply chain strategy

Occasionally, businesses within the same supply chain might choose to collaborate in order to boost the efficiency of the whole supply chain. That might involve joining forces to buy materials or products to achieve greater cost savings. The benefit of a collaborative supply chain strategy is that your business can share costs and risks with others in the chain.

Wondering how to deal with keeping your customers informed? Check out our guide on how to inform your customers of material shortages and price rises.

Supply chain diagrams

How do you build supply chain resiliency?

Here are some of our top tips for building a resilient supply chain:

  • Stay on top of your supply chain to build and strengthen working relationships within the chain.
  • Prioritise communication and share any important information both up and down your supply chain to keep everyone informed.
  • Make sure you’re easy to contact so that you can be alerted quickly if any problems arise in the supply chain.
  • Get to know your partner businesses so that you all feel like you’re on the same team – a feeling of comradery can work wonders for productivity.
  • Plan for the future and make sure all elements of your supply chain have the capacity and ability to respond to changes that might lie ahead.

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