Supply chain management (SCM) involves the activities that an organization engag

Question

Supply chain management (SCM) involves the activities that an organization engages in to coordinate the people and processes that are part of its overall procurement process. Write a supply chain management plan for your business concept (Ecommerce Music Equipment website) that includes the following:

Briefly describe the supply chain management system.
Review the product procurement process (product flow).
Describe the activities used to coordinate key players in the product procurement process.

Explanation / Answer

SCM Plan for Ecommerce Music Equipment Website

Supply Chain Management is the control of the supply chain as a process from supplier to manufacturer to wholesaler to retailer to consumer.Supply chain management does not involve only the movement of a physical product (such as a microchip) through the chain but also any data that goes along with the product (such as order status information, payment schedules, and ownership titles) and the actual entities that handle the product from stage to stage of the supply chain.

There are essentially three goals of SCM: to reduce inventory, to increase the speed of transactions with real-timedata exchange, and to increase revenue by satisfying customer demands more efficiently.

Supply chain management flows can be divided into three main flows:

The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedules, and consignment and title ownership arrangements.

Product Procurement Process

Steps involved in Product Procurement Process

a.Finding a Supplier

Finding a supplier or distributor can be hard – they tend to keep a fairly low profile.Most items you purchase from stores or from domestic ecommerce companies are subject to labelling requirements by law.Buy a sample of the item(s) you plan to stock in your ecommerce website from a well known shop, or from a well known website (Amazon is always a good call). When that product arrives, look carefully at the labeling on it. If you’re lucky, you’ll find the name of the supplier or distributor, if not, you should be able to find the name of the supplier’s website, or even their mailing address.Armed with that information, you can do a quick Google search for that supplier’s contact information and you can call or email them directly.A lot of suppliers out there are very picky with the companies they supply. The bigger the brand, the pickier they can afford to be. Most suppliers will want to see trading history, and evidence that you actually own a website. This presents itself as a chicken and egg type scenario – without a website some suppliers won’t supply you with their products, but without products to sell, you don’t want to pay someone to develop a website.

b.Doing Due Dilligence

Due diligence involves looking into the supplier you want to work with in detail – you should also look carefully at the products they’re going to sell you. It’s an important part of the procurement process – if you fail to carry out due diligence correctly you could end up on the wrong end of an expensive scam, or you could end up buying a lot of stock that can’t be sold because it’s faulty or counterfeit.

Where possible, due diligence is best done in person by meeting your supplier. Sometimes this isn’t possible, especially if you’re purchasing stock from overseas, so be sure to do as much research as possible. Here are a couple of checklists for you to work from, one for the supplier themselves, and one for the products they’re selling:

Supplier

Products

Due diligence can seem like a lot of needless bureaucracy, but it has to be done. It protects you from being scammed by sellers; it also protects you from buying stock that you can’t sell on because it’s of poor quality, or because it’s counterfeit. After running through the due diligence process a couple of times, it’ll become second nature to you when dealing with new suppliers.

c.Getting a Discount

Discounts make the retail world go round. Every supplier out there can offer you some kind of discount, whether it’s 5% off their standard prices, or free inbound freight. Some suppliers will tell you their hands are tied and that they can’t grant you a discount, but they’re not being honest. If a supplier says they can’t do anything, ask to speak to someone a little more senior like a director – someone that can approve a discount for you.

Discounts work in different ways with different suppliers. Typically, suppliers have a list of wholesale prices – these prices are designed to offer sellers a decent margin when sold at the full recommended retail price (RRP) .

Suppliers then offer each client a percentage off those trade prices – that’s your discount. The problem with standard wholesale pricing is that most ecommerce companies don’t sell things at the full RRP – and they have to throw things in like free shipping. What looks like a healthy margin will soon diminish, so you have to stand your ground and fight for better margins by ramping up the discounts you have in place with suppliers.Discounts are really important when you’re selling products online – as any established seller knows, points are hard to come by and fees come at you from all different angles, so if you can save a few dollars per unit on every single product you sell, your margins will look a whole lot healthier. When you’re up against companies like Amazon, securing the biggest possible discounts has to be done. If you settle for standard wholesale pricing with your suppliers, your company would be running at a loss. The bigger the discounts you secure with suppliers, the bigger your profit margins will be.

d.Gauging demand & placing your first order

It’s always difficult to know how much stock to purchase when you place your first order. Gauging demand can be very hard – even more so if your business is just starting out and it’s the first batch of stock you’ve ever purchased.On eBay you can click on the number of items that have sold on a specific listing, and you can see the different variants that have been purchased. You usually have access to a couple of hundred previous sales – so you can see what variant has been the most popular over previous days and weeks. This can be useful when ordering in stock – you can ensure that you order more of the popular lines, and less of the unpopular lines. Find some popular eBay listings in your niche and look at what has sold well – it’s not a rock solid basis to work from, but it gives you a general idea of what’s in demand and what’s not.

The Google Keyword Planner tells you how many searches people are executing for terms related to your products. Look at specific keyword searches – not broad keywords. If you’re looking to stock a range of music equipments, don’t look at keywords like “music equipments” – they’re too broad. Look at the number of searches surrounding the exact model number of the instrument – this gives you a much clearer indication of the demand for that specific item. If there’s no data in the keyword planner for that item, the chances are that it isn’t being searched for a whole lot on Google (that doesn’t mean you shouldn’t stock the item, though).

e.Getting permission to use trademarks & logos

For various reasons, a lot of ecommerce business owners completely skip this step of the procurement process. Marketing your ecommerce website is kind of important! If you don’t market it, no one will know it exists – consequently, you’ll make no sales.A popular way to market is by using banner ads via platforms like Google AdWords and Facebook Ads. If you’re going down this route, seek permission from the supplier or brands you’re working with to use their name and/or logos on your banners. Some brands have guidelines and rules in place to prevent customers from using their trademarked names and logos in their marketing materials. You should always seek permission. Don’t just assume the brand or supplier will be OK with you using their name or logo – ask!

Asking the question doesn’t hurt, and it can save you a lot of legal trouble. Get confirmation you can use a brand’s name and logo in your marketing materials – put the written confirmation somewhere safe. If it’s an email, print it out and file it away.

f.Listing your stock for sale

Once you’ve gone through the process of finding a supplier, conducting due diligence and placing your first order, you can proceed to the final step – listing your stock for sale! Initially, this will seem really exciting, but once you’ve created a few product pages or listings, the novelty soon starts to wear off. Adding product descriptions and images can become a bore very quickly.

Lots of people tend to do a slap-dash job of listing their stock for sale, whether it’s on Amazon, eBay or their own website. When a user clicks on your listing or your website, that’s your one opportunity to sell your product to them. Make sure you write compelling product copy that grabs their attention. Use high-resolution images that look professional. Make the whole experience pleasant and comprehensive – don’t leave that user looking for more information, or turned off by lots of spelling mistakes.

It’s much better to list 100 items over the span of 10 days than 1,000 items in one day. Give each and every product in your inventory the attention to detail it requires when listing. Great product description copy, coupled with high-resolution images is a recipe for success, no matter what platform you’re selling on.

The process of procuring products to sell can take significant time and effort, but at the end of the day, it’s the single most important part of a retail business.

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