While it’s easy to start a business, the real challenge is maintaining and growing one. That’s difficult to do when the foundational elements of your business, such as the supply chain, are built on shaky ground.
Creating a functional, efficient supply chain is an operational imperative for product-based businesses. First, it’s important to understand the difference between a supplier and a manufacturer. A supplier provides the raw materials for your product and a manufacturer assembles the final product. It’s possible to have several suppliers in your business, while only having one or two manufacturers. With that in mind, here are five key components of a healthy, reliable supply chain.
1. The Right Supplier: Profitability isn’t solely reliant on your product’s price point or your ability to convert sales it’s also about controlling costs. That’s why finding a good supplier with reasonable minimum order quantities, quality, and responsiveness is so important. It can take months and even years to find the right suppliers for your business. If you’re having trouble with online searches, consider attending industry trade shows to meet new suppliers.
2. The Right Manufacturer: Similar to a supplier, finding the right manufacturer is an iterative process. You’ll need to ask where you want your product made, whether domestically or abroad. Each option has pros and cons, not to mention, regulations. Be patient with yourself as you search for a great manufacturing fit. Sometimes, it’s even better to have a handful of options so as not to place all of your eggs in the proverbial single basket.
3. Shipping: With a product based business you have to think about how to get goods to your customer. How can you move your product from point A to B in the most efficient, cost effective way? Do you need a freight forwarder or shipping broker? What about customs? Answering these questions to make the shipping process as efficient as possible is key to a healthy supply chain.
4. Banking Relationships: When you receive that large order that helps scale your business to the next level, do you have the capital to fund your next step, or can you afford to self-finance? If you need access to capital, like most business owners, you may need to start building that relationship before the business flourishes, so you’re ready when the moment arrives
5. Mentorship: The old adage, “You don’t know what you don’t know,” applies to small businesses. If you’re not sure where to start, an industry specific mentor can advise you on a viable supply chain and help you with the four previous components.
If we have learned anything as of late, it is the importance of healthy supply chains. By incorporating these components into the development of your business, you can take steps to maintain your flow of goods and services through good days and the bad.