A common and very effective model is the Supply Chain Operations Reference (SCOR) model, developed by the Supply Chain Council to enable managers to address, improve and communicate supply chain management practices effectively.

The SCOR model runs through 5 supply chain stages: Plan, Source, Make, Deliver, Return

The 5 supply chain stages

Stage 1: Plan

Planning involves a wide range of activities. Companies must first decide on their operations strategy. Whether to manufacture a product or component or buy it from a supplier is a major decision.

Companies must weigh the benefits and disadvantages of different options presented by international supply chains.

Options include:

• Manufacturing a product component domestically
• Manufacturing a component in a foreign market by setting up international production facilities
• Buying a component from a foreign supplier
• Buying a component from a domestic supplier

If companies are manufacturing products, they must decide how they will be produced.

Goods can be:

• Make to stock (produced and stored, awaiting customer orders);
• Make to order (constructed in response to a customer order);
• Configure to order (partially manufactured the product and completed it after a firm customer order is received); or
• Engineer to order (manufactured a product to unique specifications provided by a customer).

Sometimes, the combination of these methods can produce goods. Companies must also decide whether they will outsource manufacturing. This operations planning is essential because these decisions influence the supply chain.

Planning also involves mapping out the network of manufacturing facilities and warehouses, determining the levels of production and specifying transportation flows between sites. It also involves assessing how to improve the global supply chain and its management processes.

When planning, companies should ensure that their supply chain management strategies align to business strategies, that communication plans for the entire supply chain are decided and that methods of measuring performance and gathering data are established before planning begins.

Stage 2: Source

This aspect of supply chain management involves organizing the procurement of raw materials and components.

Procurement is the acquisition of goods and services at the best possible price, in the right quantity and at the right time.

Companies will negotiate contracts and schedule deliveries with the selected and vetted sources.

Supplier performance must be assessed and payments to the suppliers made when appropriate. In some cases, companies will be working with a network of suppliers. This will involve working with this network, managing inventory and company assets and ensuring that export and import requirements are met.

Stage 3: Make

This stage is concerned with scheduling of production activities, testing of products, packing and release. The company also manages rules for performance, data that must be stored, facilities and regulatory compliance.

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Stage 4: Deliver

The delivery stage encompasses all the steps from processing customer inquiries to selecting distribution strategies and transportation options. Companies must also manage warehousing and inventory or pay for a service provider to manage these tasks for them.

The delivery stage includes any trial or warranty period, and customers or retail sites must be invoiced, and payments received. Companies must also manage import and export requirements for the finished product.

Stage 5: Return

Return is associated with managing all returns of defective products, including identifying the product condition, authorizing returns, scheduling product shipments, replacing defective products and providing refunds.

Returns also include “end-of-life” products (those that are in the end of their product lifetime and a vendor will no longer be marketing, selling, or promoting a particular product and may also be limiting or ending support for the product).

Companies must establish rules for the following:

• Product returns
• Monitoring performance and costs
• Managing inventory of returned product

Do you think we covered all of the essential stages of supply chain development? If not, what would you add to the mix? 

The post The 5 essential stages in developing a successful supply chain appeared first on Trade Ready.

This analysis should be carried out in all of the company’s main functional areas: production, marketing, logistics and finance.

Each of these areas must consider its tasks in the export process, the associated resource demands upon the company, opportunity costs, and the estimated costs of performing those tasks using external suppliers.

The costs of using external suppliers may be lower or they may be higher (as can happen when using specialist skills).

Find and keep the core of your business

At this point, the analysis is only partially complete. Managers also need to consider costs and benefits in other terms. Improvements (or deterioration) in the performance of tasks need to be identified.

For example, using a foreign market research firm may offer the benefit of greater sensitivity to local market influences. Conversely, use of a trading company would result in a loss of market intelligence.

These benefits and costs are admittedly hard to quantify, but nevertheless need to be taken into account.

The strategic dimension must also enter the analysis. The firm must not lose sight of what business it is in and what tasks are considered core to that business. It may then focus on what tasks may or may not be outsourced, depending on the supply of services and the results of analysis.

For example, if a firm is a leader in the design and marketing of shoes and seeks a global presence, it may want to devote its limited resources to investing in world class designers, tools and advertising.

The logistical infrastructure to deliver product, and the manufacturing capacity required in various parts of the world, can be supplied externally.

Selecting external suppliers

In selecting suppliers, it is always a good idea to develop a short list of potential candidates. Then evaluate their services according to established performance criteria.

The supplier that provides the best added value should be selected. Value provided by the supplier can be measured by a ratio of price and quality. As price increases, quality should increase at a faster rate.

These price and quality criteria should be both qualitative and quantitative and the supplier selected for overall fit and not just for price.

Perform background checks on the company (of credit and reputation) in order to minimize company risk. Then select the supplier that represents the best value package to the firm. However appealing a supplier, the manager should ensure that core competencies remain inside the company.

Use these tips when selecting your external supplier

Some of the desirable qualities to look for in selecting external suppliers include:

• a desire to learn about the factors that affect the exporter’s business, priorities, etc.;
• efforts to improve service, with the goal of creating a seamless relationship between exporter and supplier;
• depth of knowledge in dealing with the industry (e.g. a customs broker experienced in dealing with perishable goods) and the experience to anticipate problems before they occur (e.g. an experienced market researcher would know that respondents in certain countries answer questions in the way that they think the researcher wants, which skews results);
• investment in technologies and personnel to facilitate the transmission of information, whether it be documentation, research results or market reports;
• ability to grow with the client, whether in a large target country, region or globally;
• not dealing with competing products or services: in the case of freight forwarders and logistical firms this may not be such an issue, but it most definitely would be for trading houses, distributors and agents; and
• readiness, interest and ability to feedback information on target countries; without such feedback the firm is isolated from its international business.

Supplier selection is a two-way activity and both parties have to be comfortable to make a collaborative relationship work.

What element of your business could become more efficient if you partnered with an external supplier? What criteria would be most important to you when looking for one?

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