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Systems That Influence Cooperation in the Supply Channel

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  • 0:01 What Is the Supply…
  • 1:00 The Supply Chain in Motion
  • 2:41 Communication in the…
  • 7:10 Lesson Summary
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Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

The supply chain is an interconnected group of players involved in taking a product from concept to the consumer's hands. Cooperation between parties as they interface is necessary to provide customer satisfaction.

What Is the Supply Chain, Anyway?

Think of the supply chain as a gold chain, kind of like the one you'd wear around your neck. Each link in the chain serves a purpose. If one link is weak or broken, the chain will not remain intact for very long. So, it is the interconnected group of people involved in getting a product or service from the drawing table to the customer's hands. The players involved are:

  • Customers
  • Retail stores
  • Distributors
  • Manufacturers
  • Suppliers of raw materials

In other words, the supply chain starts with an idea or a concept. From there, it moves to a production engineer, then a manufacturing plant. Marketing gets involved, and then advertising. Distribution systems move the product to stores and ultimately into the hands of the consumer.

To the consumer, this chain may appear seamless. But to those in the supply channel, it is as sensitive to snags as that gold chain we talked about earlier.

The Supply Chain in Motion

Margie and Dan want to purchase a new bedroom set. When they arrived at Art's Custom Beds, they were presented with a catalog with some pretty high-end designs. Because Art only sells custom furniture, the couple had to place an order and wait for their furniture to be manufactured and delivered. This would take some time.

Margie and Dan made a choice. From there, Art called the manufacturer to place the order. Once the order is placed, the manufacturer calls in an order to the lumberyard for a few pieces of pine. Once the pine arrives, the manufacturer gets working on building the bed frame and dressers. Then the furniture is stained and packed up to go. The manufacturer calls a trucking company to deliver the furniture to the couple's abode.

The chain of events from the customer all the way to the lumberyard must be flawless, or in the end, the customer will not be satisfied. Suppose the lumberyard did not have enough pine? The manufacturer may have to look elsewhere. The price may be higher. This increase in price may be passed on to Art or even the customer.

The trucking company may go on strike, making it impossible for the delivery to happen. The customer may have to wait longer than anticipated. This will definitely lead to frustration.

What if the manufacturer cannot make the furniture as ordered because of a change in design? Art will not be able to fulfill the customer's requests. You can see how just one turn of events can have catastrophic effects on the end user, the customer.

Since customer satisfaction is the ultimate goal, those in the supply chain must cooperate with each other on every level. But with so many hands in the process, how can businesses ensure that there is cooperation in the supply channel?

Communication in the Supply Chain

As we learned, the supply chain involves many players. Each member plays an important role in the ultimate goal of getting a product or service to the customer. For that, each player must work in concert to achieve the goal.

Here are some ways in which the supply chain can be more unified:

  • Products need to be moved in a timely way
  • Information exchanges are between all members in the chain
  • Collaboration between members of the supply chain

Since the only party to the series of exchanges who is forking over their hard-earned dollars is the customer, it all boils down to their satisfaction.

For that, those in the chain must ensure timely distribution of products. Creating a transportation network with more than one company or means of delivery can do this. In other words, if a furniture manufacturer only uses its own trucks to move the product, there is a risk of the product not being delivered on time.

Let's face it - anything can happen. Trucks can break down, workers may strike (or even worse) and fuel prices may rise to rates that make it impossible for the manufacturer to turn a profit. Any of the events may snarl deliveries to the end user, causing dissatisfaction.

Now, it doesn't end here. If the customer does not receive the delivery as scheduled, it will not be the manufacturer that receives the complaint. It's the furniture storeowner who feels the brunt. This brings us to information exchange between all parties of the chain. As a member of the chain, it is important to share any vital information related to the chain as a whole.

Things like advanced notice of availability of raw materials, rising fuel costs, labor relations and even weather conditions is considered vital information. People who live in Florida know the winter of 2014 as one of the warmest in history. But those people who live north of Tallahassee knew it as one of the most brutal winters on the books.

How does this relate to the supply chain? Simple. With snowfalls in the feet - yes, feet, not inches - roads were impassible in many parts of the United States, leaving goods sitting in trucks for days and even weeks.

Communication throughout the supply chain was necessary. Customers bank on the products they want arriving when they want them. Transportation by truck, airplane and rail is usually pretty reliable. But this winter took everyone by surprise.

Those in the supply chain must be in constant communication during storms. Logistics were in jeopardy. Producers of raw material will call manufacturers to let them know materials may be delayed or even unavailable. Manufacturers may call wholesalers to modify delivery dates. Retailers will bring the bad news to their customers.

Lastly, collaboration between the parties makes good sense. It is a bit more involved than the previous cooperative measures. It involves:

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