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Supply chain planning is a business activity where a producer will create a method to ship finished goods to retail companies, which offer the items to consumers. Planning is an integral part of the supply chain process. Best practices include sending bids to potential channel partners, negotiating contractual terms, integrating business technology, and creating a logistics team. Manufacturers and producers are common users of supply chain planning, as they do not often have the capacity for handling these functions on their own.
A supply chain typically has several companies in the process, including transport firms, distributors, warehouses, and retailers. These companies work in tandem to accomplish a single goal: making profit. Manufacturers and producers will send a bid out to a large group of companies in each step of the supply chain. This allows the company to pit bidding companies against one another in order to achieve the lowest cost possible. This process can also weed out companies unable to handle large volumes when manufacturers or producers increase their production output.
Negotiating contractual terms is common in supply chain planning. Negotiating terms ensures that companies can achieve the most concessions available with channel partners. While price is certainly a negotiable item, other issues may also fall under this process. For example, manufacturers and producers may have specific packaging guidelines, delivery terms, procedures for damaged goods, or the resolution of incorrect shipments. Negotiating these items into the initial supply chain contract helps companies avoid costly situations in future business operations.
Business technology is also an important part of a supply chain. In today’s business environment, the majority of companies transfer information electronically. Supply chain planning will include a review of current technology in use and determine how to best integrate hardware and software into the overall supply chain activities. Failure to assess technology needs can result in computer applications that cannot communicate quickly and accurately, resulting in delayed orders or increased processing times.
A logistics team focuses specifically on supply chain planning and creating a business department for measuring the effectiveness of this process. The logistics team also works with the other companies in the supply chain to determine how well each company performs according to contractual agreements. Companies may hire an outside consulting firm to work on the logistics portion of the supply chain. This department can also look for new avenues in the supply chain to lower costs and improve the lead time of getting products through the supply chain.
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