A New Topic For Home Businesses: Manage Your Supply Chain
- Dec 28, 2018 -

What is a supply chain? It refers to the core enterprise, from sourcing raw materials, making intermediate products to final products, and finally sending the products to consumers through the sales network, thus connecting suppliers, manufacturers, distributors and end users into a whole function. Net chain structure.


As can be seen from the definition, it contains a series of economic chains from upstream materials to manufacturing and sales terminals. For most home furnishing companies, the management of channel distributors is becoming more mature, and the upward management of suppliers is still in its infancy. Between the downstream production enterprises and the upstream suppliers, more is the relationship between “purchasing and being procured”, and few household enterprises actively manage the upstream supply chain and obtain value-added parts in the supply chain.

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This may be because IKEA's status is extremely difficult to be shaken, and domestic home furnishing companies rarely achieve market share of more than 10%.


Scale, communication and trust problems


When some home furnishing companies ask whether there are management or collaboration programs for upstream suppliers, most of the answers are: We are still small in size, the stock is in the air, and we can't talk about managing the supply chain; we have suppliers, but we are limited to Supply management, product development does not require their participation; even the relationship between enterprises and suppliers is not good, lack of trust between each other, of course, the "shop bully" or "guest bully" situation.


Why is the relationship between our home furnishing companies and upstream suppliers so loose?


  There are many reasons. It is undeniable that many upstream suppliers have been taking "low price" as their core advantage for many years, and lack of research on product and market consumption habits, naturally it is impossible to carry out in-depth coordination with enterprises. For example, many domestic hardware accessories or styles are old, or follow the trend to imitate popular styles, and few systems consider the matching degree of products.


On the other hand, for most home furnishing companies, the types of raw materials required for their production are limited, and there are not many product series and types. Orders are available according to the needs of the end customer (or dealer). Therefore, for home furnishing enterprises, marketing is crucial, and even determines the life and death of the enterprise. The upstream supply efficiency or cooperation can meet the basic requirements.


Even such a request may result in friction between upstream and downstream because of poor communication or lack of trust. In the face of fierce market competition, either the upstream bears heavy cost of capital, or the downstream bears potential products and after-sales costs.


Perhaps fundamentally, home furnishing companies have never really mastered the initiative of the entire industry chain, because they have never directly faced the end consumers, and it is difficult to improve the efficiency of the entire supply chain from the perspective of consumer experience.


Where is the huge potential of supply chain value?


Although the overall situation is somewhat unsatisfactory, we have also seen that some home furnishing companies have begun to actively manage the supply chain. Some supplier companies have begun to actively cooperate with and even participate in the value added of the supply chain. For example, Guangdong Zhida Fabric and downstream companies study fabric trends and provide professional fabric solutions based on market research.


Mining the value potential of the supply chain is not a patent for “big companies”. SMEs can do the same and may get more benefits. What are the benefits of excellent supply chain management for home furnishing companies? From the perspective of the management of upstream suppliers, the advantages are very obvious:


Reduce screening and communication costs. Finding the right upstream supplier will take a lot of effort for any enterprise. From contact, communication, negotiation to docking and running-in, it will take some time to adapt. Especially for large-scale home furnishing enterprises, the change of craftsmanship is all about the whole body, and the consistency of the quality of household products is also very important.


Actively searching for and managing upstream suppliers greatly reduces the interference of useless information, and on the other hand, the communication is smoother, because the supply and demand of the two parties are relatively matched.


Help companies reduce costs and reduce market risk. For home furnishing companies, especially wooden furniture companies, production generally has seasonal differences and light seasons. For example, in the past few months, the factory has to step up the stocking and the production is generally full.


At this time, excellent upstream supply chain management can not only allow enterprises to have sufficient raw materials to produce at full capacity, but also make full use of upstream warehousing, logistics and other facilities to help enterprises reduce costs. In the face of special market environment changes, such as the sharp rise and fall of raw material prices, upstream companies can also become a good buffer to help companies minimize market risks and smooth transition.


Improve the efficiency of enterprise R&D and gain more personalized service and product competitiveness. Upstream suppliers are not only the raw material providers of home furnishing companies, but also part of the company's final products and services.


Upstream companies can participate in the initial stages of product design, especially with the expertise to help companies in the product shape, production process and refinement of marketing value.


Through close collaboration between upstream and downstream, the company has also obtained personalized services to create more unique and competitive products. In a certain sense, whether it is hardware, leather, paint, wood, machinery, etc., you can implement your unique value on the final product.


The three feet of freezing are not the cold of the day, and it is the work of the mountain. As an idea of our ideal situation for upstream management of the home supply chain, it may be a certain distance from reality. However, from now on, regardless of the size, home furnishing enterprises can pay more attention to their own supply chain, starting from active communication and active collaboration, and gradually moving toward the goal of “value symbiosis” between upstream and downstream.


Playing with the supply chain, what does IKEA tell us?


IKEA, which advocates "democratic design", is actually quite concentrated or even "centralized" in the supply chain. On the one hand, IKEA's product design starts from people's lives and advocates the perfect combination of beauty, practicality, quality, sustainability and low price. On the other hand, in order to achieve these goals, IKEA strives to achieve the lowest cost and maximize value in every aspect of the supply chain.


Since it is directly oriented to consumers, IKEA will consider the arrangement of the production process, the convenience of transportation, the complexity of installation, etc. from the design of the product, and the price is determined at the beginning. This also allows the product design to have a clear market position at the outset, to the greatest extent possible to avoid market failure. On the other hand, in order to reduce the price of products year by year, IKEA and suppliers are competitive and cooperative. IKEA divides suppliers' quotations into several parts: material costs, manufacturing costs, management fees and profits.


Among them, the manufacturing cost is reduced through industrial transformation and efficiency improvement (this part of IKEA will assist the factory to complete); the management cost is diluted by the growth of IKEA orders, and the material cost includes market objective factors, and the two agree. As for profit, in addition to the profits set by IKEA, companies need to continuously innovate and reform and optimize the cost structure.


For domestic home furnishing enterprises, IKEA is not only a model for proactive supply chain management, but also an excellent case for extending supply chain management from top to bottom and tapping value potential one by one.


In the Internet environment of “products are advertising, service is marketing”, it is necessary for home enterprises to understand the real consumer experience, and it is necessary to continuously improve the consumption experience from the perspective of the upstream and downstream of the entire supply chain.


On the other hand, whether upstream suppliers can actively participate in the value creation of products depends on the degree of openness of the company. Only when the company makes the initiative to make changes, whether it is an upstream supplier or a downstream partner, it is possible to participate in the whole process. From this perspective, it is thoughts that the home business should be liberated first, followed by action.


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