Supply Chain Management 101
[First published in BusinessMirror]
Curfews, lockdowns, quarantines, and stay-at-home orders brought about by the Covid-19 pandemic created an awareness on how our food supply operates.
Farmers harvest produce such as fruits and vegetables and food factories process them as packaged food. Middlemen such as wholesalers and distributors buy the produce and deliver the packaged foods respectively. Retailers such as supermarkets, wet markets, mom & pop sari-sari stores, and convenience stores buy the produce and packaged foods from middlemen to sell to consumers. In between them all are depots, cold storage facilities, and warehouses, which act as stocking areas, buffers, and in-transit points for transport providers.
Welcome to the realm of the Supply Chain! It is a network of suppliers, manufacturers, distributors, retailers down to the final consumers characterized by three streams of flow:
- Goods Flow. Goods move from suppliers to the final consumers. This is where transportation and warehousing play a vital role.
- Information Flow. Information is needed on where the goods are. It ranges from how many and how much, what are the prices, what’s the quality like, what are the conditions and terms of contracts and payment. And so forth.
- Cash Flow. It’s the exchange of capital and funds between consumers, customers, and suppliers, which makes the supply chain crucial.
Anything that we consume requires a supply chain. Designing, planning and executing the supply chain is called Supply Chain Management.
This is not a new concept.
Ever since humans started to trade, there was a supply chain. It is the arena where goods are exchanged, where all kinds of merchandise are delivered, and payments are transacted. It is a connected system of buyers and sellers that form relationships and actively do business with one another as they agree on things like price, quantity, and terms of payment.
What makes the supply chain complicated are the multiple numbers and layers of suppliers, manufacturers, distributors, wholesalers, retailers, storage and transportation providers that participate. And we should not fail to mention the financial institutions such as banks, investment firms, and insurance agencies that under-write the supply chain’s transactions of capital. And we do not also exclude the underlying technologies that speed the flow of both goods and data. Coupled with all these is the variable demand and the upsurge in brands and stock-keeping units that add to the complexity.
A sudden shortage of face masks at the early days of the Covid-19 pandemic caught practically all global organizations by surprise. The large spike in demand outstripped supply. There were not enough materials and vendors could not quickly respond. Laborers were limited, more so that many were forced to stay home under quarantine or to avoid risk of infecting coworkers. The shortages cascaded from procurement, to production, to logistics in which lockdowns prevented people from showing up to drive trucks or prepare goods.
In food producing regions, local lockdowns delayed deliveries to cities. People had difficulties selling and buying. There were shortages and at the same time there were surpluses.
We need to remind ourselves that the supply chain is about inter-connections.
Factories need raw and packing materials, manpower, spare parts, supplies, as well as water, electricity, and fuel. Safety and health items such as personal protective equipment have become prominent in the must-need list of items. One company discovered the need of sleeping bed mattresses to house employees that had difficulties going home or going to work at the height of pandemic quarantines.
Retailers (e.g. supermarkets, groceries, convenience stores) have realized the intricate needs for manpower and merchandise to keep their store shelves stocked, cash registers manned, and shopper traffic controlled given the speculations of consumers especially with the uncertainties of their purchasing powers.
Other sectors like the construction industry, which are labor-intensive in nature and may not seem vital, are significant contributors to the national economy. If the clients aren’t present, their supply chains cannot prosper, if not survive. Every supply chain needs the presence of suppliers and customers.
Supply Chain Management will evolve in the wake of the Covid-19 pandemic. Practitioners need to be reminded of the interconnections and realize the intricacies and risks. Expertise will be key in the emergence of businesses, big or small.
The good news is that the talent is available. We are ready to serve.
Mr. Jovy Jader is a Supply Chain Advisor, Consultant, and Regional Speaker on Supply Chain Management. He has directed and implemented Business Improvement projects both local and international which have resulted to company-wide improvements in revenue, working capital, total cost, and customer service levels. Mr. Jader is the co-author of the book Speed Kills … your Competition: Driving Growth Through Supply Chain Excellence – a book on Supply Chain Insights and Best Practices. Should you have questions or comments, please e-mail to firstname.lastname@example.org.
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