Supply Chain

Supply chains are an essential part of each company and of the world economy. Identifying threats to them is very important. As a result, supply chain risk gets global attention.

The goal of an efficient Supply Chain Management in order to increase EBITDA (and EBIT so far) is to satisfy as soon as possible the customers demands considering:

  • Realistic forecast & planning of the demand
  • Cost control over the entire SC for a correct product costing purpose and margin definition
  • Efficiency in terms of costs and timing for Warehouse management
  • Shipping management
  • Customs office requirements management

A surprising point with many supply chain risk discussions is they exclude the actual supply chain. They often do not recognize logistics infrastructure, logistics service providers, and how to manage and the move products through the supply chain. Many times, a picture, such as a ship, is used to show the logistics activities as the “supply chain”.

Supplychain

 

They also do not discuss that there are two supply chains-product and information-and how both impact the movement of items. They do not mention Incoterms and what this may do to the buyers and sellers controlling the movement of goods. Yet, these are details involved in supply chain management; and that can be sources of risk.

The supply chain risk term is also used to cover broad issues and narrow topics. For example, insurance companies talk about supply chain risk in terms of assets. Others talk about it as to sources for select products. Some take a near-apocalyptic view for supply chains. These diverse interpretations result in conceptual, not factual, information; create gaps in risk assessment; and make it difficult to identify and manage risks.

Supply Chains. There are three key components of a supply chain-

  • Product / material / commodity / component sources
  • Logistics infrastructure
  • Logistics service providers

A supply chain originates at the sources for each product. That is often a factory. For some items, such as food, there are multiple sources, the actual farms and the locations where the food is processed, chilled, frozen, or however treated. Or it could be a mine or processing area for metals and minerals. In those cases, both types of sources should be included in the supply chain scope. Also, the supply chains being reviewed continue through to buyer delivery destination warehouse or facility. It should not be stopped at a destination country border, as is sometimes done.

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