How Procurement, Transportation & Distribution Affect the Supply Chain

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  • 0:01 Affecting the Supply Chain
  • 0:38 Problems with Procurement
  • 1:50 Troubles with Transportation
  • 2:39 Disruptions with Distribution
  • 3:40 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

Even the best-planned supply chains are vulnerable to changes in procurement, transportation, and distribution. In this lesson, we look at how each of those can wreak havoc on your supply chain.

Affecting the Supply Chain

In a perfect world, your supply chain would have absolutely no friction or stops. Raw materials would magically appear exactly where and when they are needed, transportation would be free and instantaneous between locations, and waiting customers would always pick them up exactly when you wanted them to. Alas, such is not the case.

It turns out that there are plenty of points along the supply chain that issues can come up that slow down the entire process. In this lesson, we're going to take a look at some of the most common problems that plague a supply chain from procurement to transportation to distribution.

Problems with Procurement

Of course, plenty of problems can affect your supply chain before you even get your hands on the goods you need to do business. This is known as the procurement phase, when you are trying to get the raw materials necessary for your business to do its work. Every company has to go through procurement. For service companies, it may be making sure that consultants and accountants have the necessary equipment to do their jobs. However, it's easiest to demonstrate when we use a manufacturing company, so we'll focus on a widget manufacturing firm for this example.

Let's say that you've used the same raw materials supplier for your widget firm for several decades. Suddenly, they decide to cease operations. That means you're without a raw material supplier. Now, you've got to scramble to find one that is willing to sell you the same or similar materials at a cost that is agreeable.

It's not just when a supply is cut off that a hit to the supply chain can occur. What would happen if instead of going out of business that your supplier decides to raise prices? Suddenly, you've got a choice to make. If your company decides to stay with the supplier, you've got to make sure that the resources are there to make sure that payments go through. Otherwise, you've got to be ready to transition your supply chain to a different supplier.

Troubles with Transportation

In any event, let's say that you finally got access to the goods that you need. However, your struggle isn't over yet. You've still got to move the goods between your locations. Chances are, you have a transportation network that stretches over quite a bit of geography. That means that there's plenty of geography over which mishaps can happen to your supply chain.

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