Supply Chain Optimization

How is defined Supply Chain ?

Supply chain is commonly defined as a network of companies and people that are involved in the production and delivery of products or services. The components of a supply chain include producers, vendors, warehouses, transportation companies, distribution centers, and retailers.

A supply chain is the network of all the individuals, organizations, resources, activities and technology involved in the creation and sale of a product. A supply chain encompasses everything from the delivery of source materials from the supplier to the manufacturer through to its eventual delivery to the end user.

Why supply chain is a relevant consideration ?

Supply chain is often the primary source of consumption of working capital for any activity, and particularity the commodity traders that have to pay the supplies in advance as receiving the cash form its customers.

While the access to liquidity is not a given, especially when it comes to financing of commodities such as hydrocarbons, the optimization of supply chain finance becomes a strategic consideration that requires utmost attention. The profit margin from a trading transaction could be completely wiped out should the supply chain not be managed properly.

What are the different stages of the supply chain ?

Some companies active in trading participate in the production of commodities (upstream), in transportation and storage (midstream), while others are also participating in processing material into final products, or even retailing (downstream).

Supply chain finance is an agreement in which the buyer partners with a financial institution that will then pay suppliers on the buyer’s behalf. These suppliers may have to sign up for the program.

What is the Supply chain management flow ?

Supply chain management (SCM) is the oversight of materials, information and finances as they move in a process from supplier to manufacturer to wholesaler to retailer and then to the consumer. The three main flows of the supply chain are the product flow, the information flow and the finances flow. These occur across three main stages: strategy, planning and operation. SCM involves coordinating and integrating these flows both within and among companies.

What services do we provide ?

As part of the service that Alvear Capital provides to its customers, the Company support optimization of the most important source of consumption of working capital, often seen as one of the key competitive advantage. Depending of the mandate elected, the team will review in details the whole supply chain to provide enhanced solutions which will translate in a more efficient and economical supply chain. Our solutions also include the advisory in implementation of the solutions envisaged and negotiated.

Alvear Capital will participate and support the following processes:

1. Identifying the optimal set-up and supply chain financing program
2. Adequate financial institutions to onboard and which are likely to provide the financing required
3. The financial conditions to target, and last nut not least
4. Carry the process of legal framework and documentation

Supply chain models

There are several common supply chain business models that supply chains fit into. The models have two main focuses: responsiveness and efficiency. Each model strives for some combination of both but approaches those goals differently. In addition, models tend to favor one over the other. Organizations can evaluate the value proposition of each in relation to their goals and constraints, and choose which suits them best.

The model types are:

1. Continuous model — works best for mature industries with a degree of stability.
2. Agile model — works best for industries with unpredictable demand and products that are made to order.
3. Fast chain model — works best for products with a short lifecycle, such as fashion items
4. Flexible model — works best for industries with a level of stability and a few relatively predictable demand peaks.
5. Custom configured model — focuses on customizing.
6. Efficient chain model — works best for highly competitive markets in which pricing plays a large part.

What are the main Supply chain challenges ?

Modern supply chains are complex and present several common challenges, which defines that level of complexity that the onboarding of a new program will represent. Frequently, these challenges, when properly addressed, also provide more impactful results when optimization is achieved.

Alvear Capital will provide your Company with a fast-check and revert with various solutions packages, depending of the targeted level of funding, optimization and timing.

Challenges frequently faced when starting the process of a new supply chain optimization program, could include the following:

1. Potential lack of transparency. Having transparency enables stakeholders to understand the status of the supply chain.
2. Waste due to inadequate production cycle. Businesses that inaccurately gauge their supply, demand or capabilities may end up with an overstocked inventory.
3. Unsatisfied business partners and customers. The ultimate goal of SCM is to meet customer expectations. This involves managing those expectations realistically, but also providing a valuable product
4. Lost or delayed goods. Goods that go missing at any point in the chain ultimately delay the whole process and can impact customers negatively.
5. Increasing customer expectations. New technology and businesses raise customer expectations, which can be difficult to manage, and impossible to meet if not properly managed.
6. Resiliency to sudden changes in the supply chain. External factors can cause unforeseen changes in a supply chain, so best practice is to prepare for the unexpected and be able to pivot if need be.

Supply chain managers need to adapt to the growing speed and scale of the global marketplace. Best practices for doing this include:

Good to know

The COVID-19 pandemic has accelerated the diverse sourcing trend and placed an increased emphasis on inventory management and visibility. Machine learning and artificial intelligence will play an increasingly large part in diversifying supply change and improving the responsiveness and resiliency of supply chains, likely continuing after the economic shock from the pandemic has passed.

The pandemic may also cause economies to restructure their supply chains away from ultra-lean models that rely heavily on flexibility and network interconnectedness to provide product quickly.