Five key components of a healthy supply chain

While it is easy to start a business, the real challenge is to maintain and grow one. That’s difficult when the foundational elements of your business, such as the supply chain, are built on shaky ground.

Creating a functional, efficient supply chain is an operational necessity for product-based companies. First, it is important to understand the difference between a supplier and a manufacturer. A supplier supplies the raw materials for your product and a manufacturer assembles the final product. It is possible to have multiple suppliers in your company while having only one or two manufacturers. With that in mind, here are five key components of a healthy, reliable supply chain.

1. The right supplier: Profitability doesn’t just depend on the price of your product or your ability to convert sales, it’s also about controlling costs. That is why it is so important to find a good supplier with reasonable minimum order quantities, quality and responsiveness. It can take months and even years to find the right suppliers for your business. If you’re having trouble searching online, consider attending trade shows to meet new suppliers.

2. The right manufacturer: As with a supplier, finding the right manufacturer is an iterative process. You should ask where you want your product made, at home or abroad. Each option has pros and cons, not to mention regulation. Be patient with yourself as you look for a great fit. Sometimes it’s even better to have a handful of options so as not to put all your eggs in the proverbial single basket.

3. Shipping: With a product based business, you need to think about how to get goods to your customer. How can you move your product from point A to B in the most efficient, cost-effective way? Do you need a freight forwarder or forwarder? What about customs? Answering these questions to make the shipping process as efficient as possible is key to a healthy supply chain.

4. Bank Relations: When you get that big order that will help you take your business to the next level, will you have the capital to fund your next move, or can you afford to self-finance? If you need access to capital, like most business owners, you may need to start building that relationship before the business thrives, so you’ll be ready when the time comes.

5. Mentorship: The old adage, “You don’t know what you don’t know,” applies to small businesses. If you’re not sure where to start, an industry-specific mentor can advise you on a viable supply chain and help you with the previous four components.

If we’ve learned anything lately, it’s the importance of healthy supply chains. By incorporating these components into your business development, you can take steps to maintain your flow of goods and services through good and bad times.