Manufacturing Chain: Supply Chain in Manufacturing Industry

11 min read

There is a lot that goes into starting and running a physical products business. One of the most critical parts is ensuring items stay in stock. After all, having to tell customers that items are out of stock or giving them delivery dates far off in the future can easily cause them to turn elsewhere.

Fortunately, it is possible to ensure items remain stocked, with a key part being the manufacturing chain. Let’s take a closer look at the definition of a manufacturing chain and what it entails.

What is a Manufacturing Supply Chain?

A manufacturing supply chain is a series of tasks and processes that take raw materials and turn them into a final product sold by a business. This includes steps like collecting material procurement, processing those materials, production, quality assurance lines, logistics, distribution, and follow-up service.

The manufacturing supply chain is the lifeblood of any retail or ecommerce business. After all, you can’t make sales without a finished product, which is the result of a well-running supply chain.

Supply Chain in the Manufacturing Industry: 5 Steps

Now that we’ve discussed the general meaning of a supply chain in the manufacturing industry, let’s look at the details of each step involved in the chain.

Step 1. Material Procurement

The first step of any manufacturing and supply chain is the procurement of raw materials to create a product. For example, cotton is procured to make T-shirts, and steel is procured to create mechanical parts, like in an automotive manufacturing supply chain.

Step 2. Processing

Once those raw materials have been secured, some may need to be processed to become usable. This may involve chemical, thermal, and mechanical operations to transform the materials into components that can be used in the assembly of the final product.

Step 3. Production

Once raw materials have been processed, they can then begin the production process, which means turning those materials into the final product. This is likely the step that comes to mind for most people when referring to manufacturing. Production is one of the most significant parts of the supply chain, and it is often where many inefficiencies or costs can be improved and optimized.

Step 4. Logistics

After production is complete, then comes logistics. Logistics involves the transport, shipping, and storing of the finished products. For the business selling the products, this can include choosing carriers and arranging for transportation of the finished product to a warehouse or store. Storage and warehousing can be a section of the supply chain in its own right, as there are several details to consider.

Moreover, some businesses may have their own warehouse or onsite storage to keep products, whereas others may need to store them in a third-party warehouse, which incurs costs. Whichever option a business uses, it’s essential to ensure that products will be able to move efficiently for customers to receive their orders on time.

Step 5. Distribution

Distribution is also part of the logistics process. This means that once the product has arrived at the warehouse or store, it needs to be shipped and delivered to the customer. Distribution is a vital step in the supply chain, as it can be the difference in the timeliness that customers receive their products. Slow distribution can easily lead to dissatisfied customers who don’t come back to buy again.

Supply Chain Model Types

There are a few different models of supply chain operations. The right model can depend on the particular type of business and their operational structure.

Fast chain model: The fast chain model is most fitting for businesses that rely on following the latest trends. They need their products to fly through the manufacturing supply chain process to get them to market as fast as possible. Fast fashion is a good example of an industry that uses this type of supply chain.
Flexible model: A flexible model is ideal for companies mainly selling seasonal products. In other words, they will have heavy production periods with long lulls in between. They require a supply chain that can quickly ramp up to meet the production needs of busy seasons and slow down when the off-season comes.
Continuous flow model: The continuous flow model is the traditional supply chain model for many companies. However, it works best for those who create products with little variation. It simply means that production will be regularly operating to ensure a continuous flow of products from manufacturing to the business for them to sell. This model typically only works well when there is a high demand for the products to ensure they will also continuously sell.

The Importance of Manufacturing Supply Chain Optimization

A well-running manufacturing supply chain is key to successful business operations. Inefficiencies, slowdowns, or errors can easily lead to lost time, money, and effort. There are several steps in the supply chain process where inefficiencies can occur that will lead to disaster for a business.

That’s why it is so vital for businesses of all types to look for areas across the supply chain where they can optimize. Here are some best practices for supply chain optimization.

Maintain Strong Communication

One of the easiest ways for a business to optimize its supply chain is by maintaining regular communication throughout the process. This includes developing a strong relationship with suppliers, logistics services, and distribution facilities. When there is any stop or slowdown, businesses can reach out to the specific area of the issue.

Transparency Across the Supply Chain

Far too many businesses view their supply chain as an out-of-sight, out-of-mind situation. In other words, they don’t have control over what they don’t see. Yet, every business should try to maintain transparency over each point of the supply chain to the best of their ability.

This means tracking production times, staying on top of potential delays or difficulties, and tracking distribution efforts. For those with the resources, this can be monitored down to the finest details through automated sensors or tracking tags across shipments.

Optimize Pricing

The supply chain can easily become riddled with overages and increased costs when not monitored properly. For instance, just the process of finding a supplier for the manufacturing of the products can be more expensive than necessary. Sometimes, this can be solved by renegotiating with the supplier or potentially finding a new supplier.

Regular Analysis

Businesses should never just settle on their supply chain with no further review. Instead, they should conduct a regular audit and analysis of their supply chain. This includes auditing everything from the initial manufacturer to the delivery of the product to the customer. Operations change every day, and it may be that a better warehouse or a more optimal distribution method is found simply from a quick review.

Inventory Management

Adequate inventory management is often an area where many businesses can optimize their supply chain. Far too many businesses tend to order excess inventory, which can lead to additional storage costs incurred over time. Accurate inventory forecasting can help businesses ensure they have the necessary amount of products on hand to deliver to customers without going overboard.

There are numerous methods of forecasting and, ultimately, it comes down to what works for the business. Some may prefer to do their calculations manually based on general velocity, whereas others may opt for a modern tech solution like AI to forecast for them.

Technology

Modern technology has made it easier than ever to optimize the supply chain and yet, many businesses still aren’t embracing it enough. A good example of this is AI, as mentioned above. AI is becoming a valuable technology for many businesses to develop a resilient supply chain.

In fact, AI can easily help analyze data, identify patterns, and even make predictions of disruptions or short stock. There will be initial costs to implementing new technology, but in the long run, it can improve efficiency, visibility, customer satisfaction, and competitive advantage.

Manufacturing Supply Chains: The Key to Success for Any Business

Understanding the supply chain is critical for a business to succeed and improve over time. In fact, optimal manufacturing planning and control for supply chain management can be one of the best ways for a business to improve its operations very rapidly.

Not only will it help them mitigate costs, but it can also lead to increased revenue as sales and velocity improve. The supply chain consists of several different points outside of the end-point business, but this doesn’t mean they have no control over those other points.

At the end of the day, an optimal supply chain can make or break a business, allowing it to succeed in a sea of competition. By understanding the components of the supply chain as well as using the optimization points above, a business can achieve heights they never thought possible.

We hope this article helps you gain more understanding of your own supply chain and make improvements where necessary. Don’t forget to check out Ecwid Academy to grow and improve your overall business!

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Apr 15, 2024

About the author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.