When a new business is launched, it’s critical to plan and build a supply chain that can not only meet the immediate customer requirements but can flex to respond to future demand and market conditions.

Plan your supply chain before launching your business 

Before launching your business, map out your supply chain and go beyond determining where you will get your supplies from and how you get them to your customers. Consider lead times and alternate supply strategies if necessary.

Evaluate risks that your supplier’s supplier might have, or whether your goods will be subject to cost, environmental, regulatory, infrastructure and geopolitical factors. Determine if warehouse space is needed. Consider the number of items needed to meet demand and whether an internal facility can be used for storage. Location matters and may impact cost, accessibility and speed to market.

Do your research

Suppliers

Identify potential suppliers; consider their location and how it will impact the way you receive orders, and inquire about their processes, capabilities and financial health. Find a supplier that aligns with your values and not just your price point.

Customers

Get to know your customer base so you can manage expectations for shipping costs and delivery times. This will help you determine which delivery method will work best for your business — slower but more cost effective, or quicker but higher cost.

Software

The beauty of a new venture means you collect important data from the very beginning. Finding software that can help you track demand, inventory levels, lead times, price and costs will provide better forecasting (and cost savings!) in the future. Linking purchase orders to finance systems will increase order to pay efficiencies. Capturing real time order and shipment status will improve customer service.

Sourcing and contracts

Let your suppliers and shippers know your needs ahead of time to avoid questions, delays or inaccurate pricing. This lays the foundation for a strong relationship. Pick the best supplier(s) for your organization, but also consider contingent solutions. Share contractual terms and conditions in your request for proposal to streamline contract negotiations. Protect your company’s strategies and data with confidentiality agreements.

Processes and people

Once you’ve determined which supplier and logistical links to include in your supply chain, put processes in place and hire supply chain professionals to work with suppliers, order materials and supplies and forecast customer requirements. Organize to allow for category and product expertise to develop. This function should also manage risk mitigation for suppliers and goods and services critical for the business.

Tracking and measurement

Now that your supply chain is up and running, identify critical metrics and track key process elements. Analyze how long it takes to receive materials, ship to customers, turn over inventory, find supplier performance defects, etc. Use data to identify root causes, fine-tune processes, eliminate redundancies and improve relationships.

Evaluate and re-evaluate

Knowing how external and internal factors impact your supply chain will help you make efficient and effective improvements. Be aware of what risks could affect your organization and suppliers; develop mitigation plans for those that are most likely to result in significant impact. Listen to your supply chain team and encourage innovation from suppliers for the next great idea.

The post Congratulations on your new business – how’s your supply chain? appeared first on Trade Ready.

The truth is that many businesses tend to overcomplicate their supply chains. Unless they are taking in hundreds of millions of dollars in revenue, most don’t make it a top priority to simplify their global supply chain, especially if most of their products fall within the same industry or product category.

Many, if not most businesses also don’t invest enough in a supply chain team dedicated exclusively to sourcing product parts and components, planning production and arranging assembly.

Their reasoning? It takes resources away from the principal goal, which is generating sales. More companies are beginning to realize the added benefits of partnering with a contract manufacturer (CM) that can improve the efficiency of managing their supply chains.

Why do companies complicate their global supply chain in the first place?

Budgeting alone is not to blame. There are other culprits, such as misconceptions about how best to handle supply chains, which can end up by having real impacts to the bottom line.

4 Reasons to maintain a complex supply chain – Debunked

1. The best way to protect your IP (Intellectual Property)

• Many companies complicate their supply chain by employing multiple suppliers for the same product. The reasoning being to prevent one manufacturer from acquiring all the information required to reproduce their product.
• Rather than consolidating their supply chain, some companies choose to source each part using multiple suppliers to keep their suppliers in the dark. This method is adopted to reduce the risk of their IP leaking.
• While it makes sense to protect your IP, the question is, why work with a supplier you cannot trust? Would you continue to work with a distributor that steals your IP? Probably not.
• Many contract manufacturers have IP protection policies in place to prevent IP from leaking. Ask your supplier about their IP policy and ask if they work with any companies similar to yours. Are they an elite CM responsible for assembling products for industry-leading companies? If so, that’s a good indicator that they are trustworthy.
• If the answer is no, you may question if they are the right supplier for you and your project.

2. It’s more cost-effective to do it yourself

• Many believe it’s cost-effective to source products, subcomponents and parts on their own rather than having a CM do it.
• Good CM’s have a list of pre-approved vendors they have worked with for years. Building an excellent relationship with a supplier can take years to develop, more so if you are starting with lower MOQs (Minimum Order Quantities).
• One useful approach is to provide a prospective CM with a full BOM (Bill of Material) and ask them to provide you with your target costs. A good CM will give you quotes for both in-house production and quotes using their list of pre-approved vendors. The goal is for them to match you on the price.
• Some companies may have a limited amount of resources. Rather than using a costly sourcing team to manage your supply chain, it may be more beneficial to allocate your resources to departments that can generate revenue such as sales & marketing, product engineering & development to boost sales. You may want to consider identifying a CM who can hold their weight and provide full support to allow you to allocate resources to more critical departments.

3. Contract manufacturers are not project managers

• Manufacturing a unique or customized product requires full attention from a project manager. Many companies believe a third party cannot provide such care and decide not to work with them.
• CMs run production projects to stay in business, so proper project management should be embedded within their organizational structure. A CM can effectively track the entire process of the project and work with other departments heads (supply chain, production, quality and engineering).
• A CM can provide you with a project manager to be your point of contact and provide you with updates on new developments.

4. Contract manufacturers lack vendors for my project

• Another common misconception is that CMs cannot vet or provide vendors that align with your organizations’ goals. However, one of the greatest assets of working with a reputable CM is to take advantage of their roster of pre-approved vendors. Validating a vendor is no simple matter and does not take one or two projects to develop, but years of collaboration to build trust.
• Sometimes companies are content to use existing vendors and can request their CM to use designated suppliers. In this case, the CM is accountable for using only your list of suppliers, and thus both parties accept the price and quality, especially with projects using electronics (e.g. hardware, Internet of Things (IoT), robotics, etc.).

Consider the benefits of consolidating your supply chain

Consolidating your supply chain into one centralized location can expand your budget needed to increase sales, product development, and engineering.

There are many reasons why companies choose to consolidate their supply chain. The initial process of validating the right CM might seem complicated at first, but it can provide a substantial positive impact on your company and profits, in the future.

1. Allocation of resources

• Allocate more resources to sales and marketing, rather than taking resources away from it to focus on sourcing.

2. Cost effectiveness

• CM’s prefer to handle a more significant chunk of the project, than a small portion of the project like parts or subcomponents. The broader your engagement with a CM, the better your prices. When you leverage their full capabilities, your efficiency will improve, and costs will likely be more economical.

3. Better lead time

• Your CM has a number of pre-approved vendors that include a number of materials. Consolidating your supply chain with them will give you access to those pre-approved vendors.
• Rather than sourcing suppliers from all around the country or world, and driving your logistics insane, you can allow your CM to take the brunt of the pressure and take the lead.

4. Stronger development support

• Provide your CM with a more substantial mass of your project, will encourage them to be more inclined to allocate more resources to your project as well such as engineering and technical support.

Leverage professional supply chain management

As a business owner, you need to focus on growing your business rather than the management complexities of sourcing, manufacturing, assembly scheduling and shipping coordination. Consider delegating your supply chain management responsibilities to a team dedicated to managing all the moving parts to allow you to allocate resources to more vital aspects of your business such as generating revenue via sales and marketing – the lifeblood of any business.

The post How to simplify your global supply chain appeared first on Trade Ready.

After a surge of initial excitement, the mania surrounding cryptocurrencies has somewhat subsided since December 2017. Cryptocurrency prices might be in the gutter right now, but some of the brightest minds in tech still have their noses to the grindstone trying to drive crypto projects forwards.

The question is: are these tech pioneers are flogging a dead horse, or is there something behind the claims that the technology behind cryptocurrency is one of the most important fintech advancements in history?

“It’s bigger than the Iron Age, the Renaissance. It’s bigger than the Industrial Revolution.”  – Tim Draper – US Venture Capitalist.

Globalization has spawned a complex network of international trade and business. For cryptocurrency to live up to the promises made by commentators like Tim Draper, it is clear that it must disrupt and create value in international business. Only then will cryptocurrency enact true change on a global scale.

Current trade barriers come at a high cost to businesses

It’s no secret that international business is a logistical challenge. Global trade is dominated by multinational companies that have a global approach to operations, production and markets. This means supply chains commonly span multiple nation states.

Even relatively simple business functions, such as payments and product component shipments, can cause logistical issues. That’s not even accounting for added barriers such as the different importation and exportation regulations that multinational companies have to comply with across their global supply chains.

Right now, international business is being held back by the following factors:

• high banking fees
• terrible currency conversion rates
• human errors in documentation
• improper document storage
• slow payments and document transfers

All these factors require multinational corporations to expand payroll to deal with them and keep their global supply chains running smoothly. Needless to say, this added cost places a burden on international business and erodes profit margins.

According to the World Economic Forum’s report on Enabling Trade: Valuing Growth Opportunities, reducing the barriers faced by global supply chains could increase global trade by up to 15% and increase overall GDP by 5%. This equates to around a $3 trillion uplift in global economic output per year.

To put it another way, companies with global supply chains are collectively losing $3 trillion per year to these challenges.

How can cryptocurrency help offset supply chain costs?

Cryptocurrency has given us two main technologies to streamline supply chains. These are:

Blockchain: This is a digital public ledger that records information securely, publicly and with an indisputable time stamp. The problem with traditional means of storing data is that there is usually a single point of failure. History has shown that even multinationals are not immune from having their data estates compromised and having to deal with increasing regulatory pressure or penalties. Bitcoin, since its inception in 2008, has never had its ledger compromised. Indeed, the Bitcoin ledger secures over $100 billion dollars of value right now.

Smart Contracts: This type of contract allows for the distribution and collection of digital or digitalized assets. There is no need for a middleman at all. The easy way to think about smart contracts is that they are similar to vending machines. If a certain condition is met, then a predetermined outcome is executed. With a vending machine, if you put $1 into the machine you then get a can of coke. Smart contracts act in a similar way and can be customized to meet business needs. Theoretically, anything of value can be traded via a smart contract.

Transaction inefficiencies in global supply chains

The truth is that there have been no major updates in transaction infrastructure for decades. Global payments can take days to be validated, expensive currency exchange is often required to settle operational expenses across the global supply chain, and banking fees can be extortionate.

The key point is that the current global infrastructure to transfer value has significant room for improvement. This is something cryptocurrencies can help with. In June 2018, the popular cryptocurrency, Litecoin, was used to transfer $99 million worth of value. How long did this take and how much did it cost? Well, the transaction took a few minutes to validate and the sender was charged $0.44 in fees. We challenge you to find a traditional method of transacting value that can achieve the same results at a cheaper price.

Fast and cheap payment validation not only means the pace of business can be faster, but it gives corporations a significantly cheaper payment alternative to keep their supply chains running smoothly.

Supply chain automation

From a business perspective, the main issues with supply chain management are human error in documentation, the number of people required to keep the supply chain running smoothly, and the cost of import/export compliance in different countries.

Smart contracts give companies the opportunity to automate their whole supply chain. How would this work? Let’s imagine we run the ‘Awesome Car Company’ and have a supply chain that requires shipments and payments to a dozen different countries. We must be aware that many of these countries have different importation and exportation regulations for us to comply with.

The UK distributor of the ‘Awesome Car Company’ has sold some units. Their inventory is now down to 9 units and has triggered the smart contract low stock rule (the smart contract executes when inventory is below 10 units). This means the rest of the smart contract deploys and automatically issues contracts for car parts from each supplier in our supply chain, which are securely stored on the blockchain.

Issuing contracts for each supplier is not enough to get our new car units. Suppliers need to be paid. Smart contracts can also be used to automate payments to all our suppliers in cryptocurrency. Automated cryptocurrency payments can be processed from the distributor in the UK to the head company and then to all the suppliers in our supply chain.

Shipping and customs documentation from the suppliers can be instantly generated, with each country’s regulations taken into account. These documents can then be sent securely to the UK distributor of the Awesome Car Company. In essence, our whole supply chain is automated through smart contracts and the UK distributor of the Awesome Car Company can just sit back and wait for his new car units to arrive. The CEO of the UK distributor can now significantly reduce payroll and increase their margin on each car unit sold.

Blockchain can help solve global counterfeiting issues

According to the International Chamber of Commerce, counterfeiting could cost the global economy $1.9 trillion a year by 2022. This just shows the scale of the counterfeiting problem for international businesses and the drain it imposes on the global economy.

The good news is that there are cryptocurrency projects focusing on securing global supply chains from counterfeiters. One such project is China-based Wabi. Wabi provides a solution to track products through every step of the supply chain, from the manufacturer to the shop shelf.

When the product is manufactured, it is secured by an RFID label. These have been specifically developed to resist accidentally breaking in transit or tampering. These labels are then scanned at every stage of the product’s journey through the supply chain. Data such as the product’s geographic location is stored on the blockchain.

Data stored on the blockchain cannot be altered or edited, meaning that records stored cannot be altered by nefarious actors.

Wabi also has a consumer app. When a customer is in a shop and they come across a Wabi protected product, they scan the RFID label in the app and all the supply chain data can be viewed. If the product’s physical location on the store shelf does not reconcile with the information on the blockchain, then the customer will be alerted that the product has likely been tampered with. In short, the product is not where it should be, meaning that the supply chain has been compromised.

This technology gives customers assurance that what they are buying is the genuine product from the manufacturer. It’s not just about saving corporations money. In 2004 and 2008, the Chinese baby milk supply chain was compromised and counterfeit products hit the shelves of shops. This resulted in:

• 2004: 63 infant deaths
• 2008: 6 infant deaths and 300,000 hospitalizations

The impact of global counterfeiting is not just an economic problem. It is a problem that costs lives, and that is why adoption of blockchain technology can add very real value to securing global supply chains.

The full potential of cryptocurrency is still to be seen

Before we get too excited, we must remember that cryptocurrency is still far away from being widely adopted at a merchant and institutional level. Indeed, cryptocurrency as a store and transfer of value may have no place at all in international business.

However, Tim Draper’s comments that cryptocurrency is bigger than the Industrial Revolution could be spot on when it comes to the potential impact that blockchain and smart contract technology can have on international business.

The potential to create a new economy is certainly there. Some may think similar things were said in the dotcom bubble and other bubbles of the past. But consider what you are using to read this article. Maybe the supporters of online business during the dotcom bubble got something right after all?

Technological advancements and adoption take time. But if cryptocurrency can actually bring wide sweeping changes to international business, I believe that it will be blockchain and smart contract technology that will change everything and usher in a new global economy.

The post How could cryptocurrency impact global supply chains? appeared first on Trade Ready.