What is Supply Chain Management?

As will be well-known to anyone who has worked as a retailer (either as an ecommerce business or a physical outlet), there are a few intermediary stages in a product’s journey from manufacture to sale. In between lies the retailer who stocks a quantity of a product and a wholesaler who sells it to them in bulk. This entire process is known as the supply chain, and it is in everybody’s interests to manage it well, some duties naturally falling to the wholesaler and others to the retailer.

Generally speaking, the retailer’s job is to provide a product that they think will sell well, allowing them to make a profit on the amount spent for a wholesale batch and generating the demand that is in turn necessary for the wholesaler to have any business at all. The wholesaler’s job is to supply, a task which involves ensuring a steady stream of inventory from the manufacturer and an efficient system of shipping that is flexible enough to accommodate fluctuations in demand.

A single broken link in this supply chain (at any point) and profit margins are going to suffer. Olympic Eyewear, a distributor of bulk designer sunglasses, say that this broken link can be the responsibility of the retailer or the wholesaler (or even the manufacturer), but everyone is going to suffer the results of less sales. Supply chain management is essential.

How Does Wholesale Work?

Before getting on to some advice about supply chain management for retailers, it is worth setting out in a bit more detail how the wholesale business model works. A wholesaler makes profit by selling large bulk orders of a certain product, which they have bought in even greater volume from a manufacturer. It is something of an economic constant that buying in volume reduces price per unit, so a profit is made when the products are sold onwards.

However, this isn’t all that wholesalers do. Wholesalers are also responsible for the distribution of those products to the retailers and accommodating for fluctuations in demand and orders. They should communicate all of this to retailers and, ultimately, play their role in efficient supply chain management.

How Good Supply Chain Management Helps Retailers

For physical outlets and ecommerce sites alike, good supply chain management makes all the difference. Here follows what it can offer for businesses:

Right Product, Right Time

Retailers not only need to meet demand, but to forecast demand as well. If a sudden spike in sales leaves stock depleted, then the supply chain has not been well managed. Retailers should ensure they have enough extra stock for such events and, if demand is forecasted to increase or decrease over longer timescales, retailers need to be able to change their order volume accordingly. Changes in the precise type of product that is in demand need to be forecasted too, and orders appropriately adjusted.

Optimizing Ecommerce Delivery

To succeed in ecommerce, you need to meet customers’ high expectations for delivery. A weak link in the supply chain can mean that customers are waiting longer for products, something which, in the current ecommerce world, is a sure way to make them go elsewhere.

Reducing Fulfillment Costs

If a retailer suffers from poor inventory storage, then order fulfillment can become very costly. The products need to be where they need to be before an order is placed – not geographically dispersed at that point. Similarly, products need to be on the shelves in physical outlets when customers are browsing. They will not be if supply chain management is inefficient.

There is no substitute for an efficient supply chain between manufacturers, wholesalers, and retailers. It is essential for business success.

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