Starting a Supply Chain
May 12th, 2012 1:25 pm Category: Optimization, by: John Hughes
I work in the area of Supply Chain management and optimization. In my world, the organizations I’m usually dealing with are relatively mature with pre-existing supply chains. Recently though, I’ve been considering the challenges that face a single entrepreneur who is trying to start a small business and must create a whole new supply chain from scratch. Just think about all of the information that this start-up must gather and digest before any decisions are made. Then based on this data the entrepreneur makes a range of decisions; any one of which could sink the entire enterprise. When you realize the amount of work and skill that goes into this process, you can’t help but admire the individual who embarks on such a journey.
What prompted these musings was that my nephew has set up a business that will import various teas and dried fruit from East Africa into the U.S (his company is Mavuno LLC, the brand is Mavuno Harvest). He spent some time in Kenya in the Peace Corps, so he’s familiar with the language and he does have contacts there. His first challenge was to find an African source who could meet U.S.F.D.A manufacturing standards. And a related issue was understanding U.S. labeling requirements (you know the ‘x% carbohydrates’ and ‘y% calories from fat’ kind of stuff), then finding a lab that can do this work, and getting samples of his product to the lab.
Next there was designing the packaging, and finding a printer who could supply the packaging to the manufacturer. There were no printers in Kenya who were interested in his small order (10,000 bags), so he went with one in India. And he used a website to design the packaging, who in turn put him in touch with a company in Croatia to actually make the stuff. And let’s not forget lining up some financing because none of these folks work for free. Once he had his first batch of product made, he had to arrange for it to be shipped back to the U.S. in one of those 20-ft shipping containers.
While this first load of product was making its way across the ocean and through the various customs offices, my nephew high-tailed it back stateside and started knocking on doors. He previously had some discussions in America with certain merchants, so he did have some sense that people would be interested in the product. His selling points are that it is “Ethically sourced” (which is code for the fact that the workers are fairly treated) from “Sustainable Agriculture”. It would be sold in places like coops and relatively high-end markets.
But now his next problem is how to deal with success; what if these products sell! Now he has to go back and create a functioning, dependable, repeatable Supply Chain. He would have to go to that printer and manufacturer in Kenya and get them to make more; maybe get a few openings in their schedules to make regular production runs . Once that happens, then my nephew would need to set up a regular mechanism for shipping the product. And when product begins arriving in the U.S., where does he store it? Maybe just drop the shipping container in the back of my brother’s house?
Obviously there are entrepreneurs out there, who are wrestling with these kinds of decisions every day. They’re building Supply Chains from the ground up and the long-term success of their enterprises depends on the decisions they make at the initial stages of the process. By luck and by design, they are putting the foundations of their Supply Chains in place, and it is these first steps which will dictate the future. I truly admire their initiative, and wish them the best of luck.