5.1 Your organisation’s supply chain
Have a look at the following statement:
Customers are the most important people in the marketplace because they buy your products and services, and competitors, who can influence whether or not you actually have any customers, are key to understanding your sector. But suppliers merely provide an organisation with materials and services, so are arguably of less importance.
What do you think – do you agree with this? Can you think of arguments you could raise against it? You might think of the following:
- Many of an organisation’s costs are locked up in its supply chain. We tend to think of an organisation’s immediate labour and production costs as being key to its well-being. If the supply chain is complex, however, substantial transport, labour, warehousing and other costs may be incurred by suppliers and passed on to the organisation higher up the chain. This means that it might be mutually beneficial for organisations in a particular supply chain to share information on costs and processes with the intention of reducing these to achieve the most cost-effective production possible. Examples of such collaboration include liaising with suppliers to reduce bottlenecks, using just-in-time techniques to smooth the flow of manufacturing, relocating factories and warehouses to reduce transport costs, and analysing transport and delivery routes to find economies.
- Ethical and transparent business practices are becoming more important, with consumers demanding to know more about how a particular product is produced and distributed, along with the human, environmental and other costs involved in doing so. As a result, many large organisations are incorporating codes of conduct and guidelines into their own cultures and systems, and are insisting that their suppliers do likewise. In these circumstances knowledge and understanding of the supply chain and the elements within it are essential.
- It is important to recognise that suppliers might also be customers for the final product. In the case of the plastic football in Activity 7, it is not ridiculous to speculate that the children of an oil worker who extracted the oil, later converted into plastic, might end up playing with a football produced from the same oil. An organisation therefore has a real self-interest in ensuring that it understands the nature of the businesses forming the supply chain. Building lasting relationships with these will enhance its reputation and its brand.
Activity 8 Identifying my organisation’s supply chain
Consider your organisation and the products or services it provides. Take one of these as an example and list the stages necessary for its production from raw materials through to its final sale, as with the example of the plastic football in Activity 7. You could talk to someone that you work with in order to generate ideas for this activity.
This is not necessarily a straightforward exercise, particularly if your organisation is involved in providing services rather than a product, so well done if you have persevered.
Once again, grasping the principle behind Activities 7 and 8 is more important than the answers you provide. All organisations have supply chains of some kind and they are an important element in understanding your sector. Having a good knowledge of the supply chain allows you to show your current organisation that you have the motivation and commitment for more responsibility. It also helps you to identify where potential might exist for career progression elsewhere.