The manufacturing supply chain is a complex network of steps by which raw materials are converted to finished goods, ready for sale. This process starts with sourcing raw materials, followed by production, logistics and finally, distribution to retailers or end consumers. Traditionally, supply chains operate in a linear fashion, with each step different from the other.  

Supply Chain: Key Elements

A typical supply chain in manufacturing has several important elements

  • Planning: Forecasting for demand and resource allocation are crucial to balance supply and demand.
  • Procurement: Sourcing raw materials and managing supplier relationships to maintain quality while keeping costs low.
  • Manufacturing: Process by which raw materials are converted into finished products – planning, quality control and scheduling are important parts of this step.
  • Logistics and Transportation: Movement of goods and materials, first from suppliers to manufacturers, then ultimately to consumers.
  • Distribution and Fulfillment: Final delivery of products including order processing and customer service support for returns (if applicable).

Traditional Approaches in Manufacturing

A lot of manufacturers rely on traditional systems that are mainly linear. There are a few approaches, depending on the type of demand or business:

  • Continuous Flow Model: Best suited for stable demand products, the focal point here is efficiency but it can prove rigid when market conditions fluctuate.
  • Fast Chain Model: Ideal for industries that need quick product turnovers – this model is prone to inefficiency if not managed properly.
  • Efficient Chain Model: The aim here is to reduce cost through strategy and processes and may sometimes overlook investments in technology and innovation. 

The Problem with Traditional Supply Chain Systems

  • Inflexibility: Traditional models usually struggle to adapt to sudden market fluctuations. Stockouts or extra inventory are direct pitfalls of this rigidity, and both situations can cost businesses dearly.
  • High Cost of Operation: Poor strategy in procurement and production stages can ramp up overall cost of operation. Poor sourcing strategies mean higher material cost or delays that can affect production schedules.
  • Waste Generation: Lack of efficient planning and processes often lead to significant wastage with regards to material and time, both of which have a direct impact on profits. 

Financial Impact of Traditional Systems

Relying mainly on traditional supply chains has several disadvantages, particularly on the financial side of the business. According to a 2023 Supply Chain Outlook research, almost 60% of small and mid-sized businesses report revenue losses of 15% or more because of delays in the supply chain. These disruptions have a massive impact on the cash flow and overall profits. Increased cost is another significant issue when trying to maintain outdated systems. The high labour and resource cost generally associated with these inefficiencies impact margins but also prevent the business from investing in more effective methods of operation.  Most traditional supply-chain processes focus heavily on cost cutting, bypassing process optimisation, which then leads to low return on investment (ROI). Low ROI directly impacts efficiency and manufacturing businesses can find themselves stuck in cycles of low productivity that impact both growth and innovation.  

Globalisation in the last decade has caused a massive shift in how businesses operate and handle demand. The market has become way more dynamic than what it was before and manufacturing too, has followed suit – however, this wave of globalisation has also left manufacturing businesses all the more vulnerable. Natural disasters, shifts in global politics and shipping delays are potential threats that can cause disruptions with long-term impacts. To stay ahead of the game, it is important to fortify the supply chain and create systems and processes that are future-ready and built for efficiency. 

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