In terms of metaphors, the river is a perfect picture of a general supply chain. At the river’s source lies the producer of the raw materials. He loads his wares onto a boat and sails downstream until he reaches his buyer whereupon he offloads his goods, takes his payment and sails back upstream to his home. The buyer then assembles the raw materials into a product and ships them further downstream to his buyer. The goods travel downstream and a payment is returned upstream. This process continues down the length of the river until the finished goods are sold to the consumer.
In terms of the river, two things always happen. Goods travel downstream and money travels upstream. And so it is with the supply chain.
In the event that the supplier at the start of the river delivers directly to the end customer, the supply chain is a simple two stage process. Once there are multiple buyers and suppliers involved however, the supply chain becomes more complicated.
Also worthy of consideration is the fact that the cost of the intermediate goods rises with each stop. Value is added to the product at each intermediate stage and prices must also rise to cover mounting costs.
At this level, everything is still quite simple without any obvious room for efficiency savings. However, add an accounts department at each stop and the process immediately becomes more complex. The buyer has to send a purchase order to the supplier upstream before the goods can be sent downstream adding another journey to the supply chain. An invoice can be sent along with the goods, but payment and remittance advice will not be available immediately upon presentation, so that means another trip upstream to clear the account. Suddenly the supply chain is slowed considerably. Instead of a simple there-and-back trip, the are now three or four journeys required for one hop in the overall supply chain.
At this point, only the introduction of a system which links both up and downstream but which exists outside both can make the efficiency savings required to maximise profit and ensure value added is retained as profit. Adding an electronic supply chain integration platform such as Celtrino’s Smart Admin system obviates all the journeys back and forth with bits of paper between suppliers and buyers – almost like sending a carrier pigeon between both parties and saving the ship’s captain a number of trips.
Less trips, means lower costs. Tying seller and buyer together with an integrated supply chain management helps increase efficiency and everyone shares in the increased profits.
October 24, 2011 in
B2B Platform in the Cloud, Electronic Remittance Advice, Integrated Supply Chain Management Platform, Supply Chain Integration, Supply Chain Management, Supply Chain Performance, Supply Chain Upstream and Downstream