Supply Chains are important within every business and every person’s life. A supply chain is the network of all the individuals, organizations, resources, activities and technologies involved in the creation and sale of a product, from the delivery of source materials from the supplier to the manufacturer, through to its eventual delivery to the end user.
Everything we do, everywhere we go, every business and person uses a supply chain at some point in their daily activity. Eating, drinking, living, moving, commuting, these are all daily activities supported by supply chains. When you consider business growth, volume, velocity, and distance are the three most important supply chain factors.
Volume is a primary driver of the type of supply chain you use. When we first start out, our volume of service or product is usually low, and as we grow it begins to build. A low volume supply chain has a higher cost than a high volume supply chain on a per unit basis. As your volume increases, your supply chain should also shift. The supply chain becomes less expensive per unit because your costs are spread out across more units.
The second key factor is velocity. Are you in a hurry? If yes, it will cost more (FedEx overnight is a lot more expensive than FedEx 2-day service). The question to ask is – how long can someone wait for what they need? If the answer is “a while” then pick the slowest delivery method – it will always be lower cost than faster.
Finally, the farther you go to deliver, the more it will cost. If you are buying and selling product in your own city delivery costs are low. If you are buying or selling product overseas, your costs will be higher. So if you are a small business that is just starting out, try to deliver and sell locally first and then to other cities, provinces, and countries after you have built up more volume.
As your business grows, the type of supply chain that you use and how much it costs shifts. The important thing to know is that as your business grows the type of delivery system and supply chain that you need will change. If you go from shipping a few cases to thousands of cases, but you are using the expensive courier model, then you will have a declining rate of return and your profitability could be negatively affected. Understanding how your services and products are delivered and how much it costs is an important part of containing operating expenses to ensure maximum possible profit.
About the Author
Corrie Banks is a supply chain costing and solution design expert with 20 years of experience implementing technology and supply chain efficiency projects. Corrie has worked for Canadian Pacific Railway, Canadian Pacific Logistics Solutions and Parmalat Canada with a progressive career starting as administrative assistant progressing to Senior Management to President of Triskele Logistics.
Corrie has managed $25M transportation budget including fleet, warehouse, and 3 rd party freight carriers. While at Canadian Pacific Corrie created statistical analysis systems for Mechanical Services, managed IT projects for Customer Service, and managed many aspects of Canadian Pacific Logistics Solutions including 3rd party logistics for a large CPG company, a large alcohol producer and steel pipe manufacturer. Her technical, analytical and operations management experience has resulted in ~7% - 10% annual cost reductions year over year for the organizations that she has worked with.
Corrie has a Bachelor of Commerce degree from the University of Athabasca, a white belt in Lean Manufacturing and a green belt in Six Sigma. Corrie is the Chair of the Calgary Logistics Council, a member of the Van Horne Institute Women In Supply Chain steering committee, a past project advisor the Van Horne Youth In Supply Chain project, a working group member for the Canadian Supply Chain Sector Council - Supply Chain Links Part II: Connector project, and the Chair of the Supply Chain Management program advisory committee for SAIT. She is passionate about people, getting involved in helping others and supporting them in their career development.