11 November 2020
This week, DESTL talks to Floriane Masse, Project Manager in the Export Montreal West (ExMO) team, our dedicated export department.
A supply chain is made up of a network of actors contributing, directly or indirectly, to the satisfaction of a client's demand.
The supply chain thus corresponds to physical flows (handling, delivery, packaging, transport, etc.), information flows (forecasting, transport preparation, production planning, etc.) and administrative flows (order processing, control of the delivery schedule, payment control, etc.).
The supply chain includes, among others, suppliers, carriers, processors, distributors, service providers and retailers. Its mission? To get the right product to the customer, at the right place, at the right time, in the right condition and at the right price!
In general, supply chain risk management is a central issue. Each company must identify its risks, quantify their impact on the organization and finally prioritize them. Examples of these risks include obsolete inventories, raw material shortages and uncertain demand; these risks have been at the heart of manufacturers' concerns since the beginning of the pandemic.
1. Supplier management
One of the major challenges for any company is the management of its suppliers. It is strategic to choose the country of origin of its suppliers as well as to establish a relationship of trust and good communication with them.
Supplier diversification is also important. We suggest the 70/30 rule: entrust 70% of your purchases to a main supplier and the remaining 30% to another supplier in order to limit the risks of dependency.
Moreover, we recommend that you classify suppliers by risk, i.e. according to the degree of impact of this risk on your company. For example, it may be beneficial for your company to anticipate whether one of your suppliers is likely to go out of business or even be out of stock (particularly due to VIDOC-19).
Too often, insufficient resources (time and money) are allocated to supply chain improvement.
Yet, regardless of the size of the company, the supply chain has a central role in the business. It can have an impact on the delivery time as well as the final price paid by the customer.
This is why the general management and the logistics department must be aligned and have a common vision of the resources to be allocated to continuous improvement.
Several reasons, such as price, quality or availability of resources, push companies to source abroad. However, this choice to internationalize its supply chain can include certain challenges.
First of all, it is important to consider the management and choice of Incoterms for import and export, which define the obligations of the buyer and the seller.
Also, one must be aware of possible price variations, especially due to exchange rate fluctuations. You could include a clause on this fluctuation in your contract with your supplier.
In the context of international procurement, contractors must also consider the notion of political risk. Political risk occurs during geopolitical conflicts or during trade wars such as the one between China and the United States.
Finally, as in all international endeavours, entrepreneurs must be aware of the cultural distance that can impact relations with their partners.
Many Quebec SMEs subcontract in China, however, the trade war between China and the United States has resulted in a tightening of tariff barriers and an increase in taxes on products manufactured in China.
Two major impacts have been noted:
DESTL can help you optimize your supply chain. Write us for more information.
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