The implications of your business’s supply chain

shoppingBy Emmanuel Iruobe

Africa, today, is rapidly embracing technological innovations like the eCommerce trend sweeping across its major economies.

Citizens of these countries are pleased by the added convenience they experience when shopping, but few may have ever thought about the back-end processes that facilitate such deliveries. Supply chains encompass the companies and business activities needed to design, make, deliver and use a product or service. Businesses are absolutely dependent on their supply chains to provide them with the necessary resources to remain operational.

The way businesses work, typically, is hinged on the transformation of raw materials to products and/or services. Raw materials are delivered via supply chains to businesses which add value to these materials by multiple processes after which they become finished products, but the chain doesn’t stop here as the products must continue the journey on the supply chain until it reaches the final consumer.

Even consulting-type firms that do not manufacture products still use supply chains for whatever service they provide; the raw materials for the work could come in the form of data from the Internet which is transformed into “marketable information” and shipped to customers who are willing to pay. In between raw materials and finished goods, multiple transformations occur across several stages, the number of which vary depending on the industry and amount of processes necessary to produce the finished offering.

One of the most complex supply chains can be seen in the oil sector, the value chain here is divided into three in order to ease analysis and activities – the upstream, midstream and downstream segments, and entire business units are built around these three divisions. The upstream segment deals with oil exploration and production, this is where hardcore drilling is facilitated on offshore platforms. In the midstream sector, series of activities are executed in order to transport the crude oil across long distances and multiple geographies.

These activities are so complex that they warrant a distinction from the upstream and downstream segments. Refining, marketing and sales all occur in the downstream sector, and this is where the ultimate consumer gets serviced. The approach a business takes to managing its supply chain depends both on the complexity of its operations and the overall business strategy it’s running with.

If the business competes on cost, all of its operations must be optimized to deliver value at low cost and the supply chain here must be managed accordingly with low inventory and storage capacity. However, if the business were to be heavily themed around responsiveness and customer service, large inventories may be required in order to meet sudden shifts in demand, this changes the entire approach to managing the supply chain.

Generally, when thinking about managing these chains, the key factors to consider would be degree of production and inventory, location of the business and production/storage plants and the type of transportation required to move the materials around. After considering these four factors, a viable supply chain management strategy can be formulated. Supply chains are so important and they can be a sure source of competitive advantage.

And, now that the world has gone amok with sustainability concerns and environmental conservation, companies have come under pressure to ensure that the flow of value across their supply chain does not endanger the environment in any way. This is changing the way business is done in the ongoing twenty-first century. – Ventures Africa

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