LP101: Supply-Chain Management and the Point of Origination

The point of origination is a fundamental but extremely important aspect of the process

Cargo Barge LPC

Supply-chain management encompasses the planning and management of the many activities involved in sourcing, procurement, conversion, and logistics management for the business. It involves planning and processing orders; handling, transporting and storing the products purchased, processed and/or distributed; and managing the inventory of goods in an efficient and coordinated manner.

The primary objective of supply-chain management is to fulfill business demands through the most efficient use of resources. By maintaining effective control over inventories and distribution, the supply chain seeks to match and manage supply with demand to reduce costs, improve sales, and enhance company profitability.

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The Point Of Origination

The point of origination is literally where a particular product comes from. This could involve a vast array of sources across the world, and through different product channels depending on the types of products sold, the specific practices and philosophies of the particular retailer, exclusive and non-exclusive business partnerships, the costs associated with moving the product through the supply chain, trade laws, vendor practices, labor laws, the time of year, and any number of additional factors that might influence supply, demand, purchasing and product movement.

Retailers may purchase products directly from a manufacturer, from a third-party vendor, or even from another retail venue. All of this can vary considerably based on the individual retailers, the products that they sell, the vendors that they deal with, and the contracts that they follow.

The point of origination is a fundamental but extremely important aspect of the supply-chain management process. In retail our objective is to obtain products that we can offer for sale and ultimately offer those products for purchase through our various retail outlets. The first step of this process is to secure the products that we wish to offer for sale. We want to offer quality products, we want to obtain the appropriate quantities of product balanced with customer demand, we want to get those products in the hands of our customers as quickly as possible, and we want to manage the entire operation in the most economical and cost-effective way possible.

Where the product is coming from can significantly impact each of these variables. Does the product have to pass through customs? If the products are manufactured internationally, are the products flown in, or does the product pass through our ports system? Are climate or weather issues a consideration in securing these goods? Are there political, labor, regulatory, or other business considerations? There are a host of issues that must be managed to simply secure the products that we wish to offer for sale, each of which can significantly impact the success and profitability of the entire business.

When Do You Take Ownership?

When we establish ownership is another primary determination that can have a significant impact on the business operation. This not only establishes the right of proprietorship, but also the assumption of responsibility for the products. Bearing in mind the complexity of the world trade market, this distinction can be critical.

Ownership of products can be determined in many different ways, and at different points depending on specific contract negotiations and other predetermined factors. However, generally speaking we can look at three primary considerations:

  • When a retailer owns and operates their own factories/manufacturing operations, they own the product throughout the process.
  • When the retailer has their own private brand of products manufactured by a third party, the company typically takes ownership as soon as the manufacturer loads the container, or at the point of shipment. This typically happens when a manifest or bill of lading is signed by the retailer or their agent, as opposed to when a box is placed on a container.
  • When the retailer purchases products from a domestic middleman/third-party distributor, the company typically takes ownership once the product is officially received at the distribution center (or store in the case of direct shipments).

Ownership determination will vary from company to company, and every loss prevention professional should learn the particular ownership guidelines within their own organization in order to effectively carry out their responsibilities in the supply-chain management process.

Building a successful career in loss prevention has always been predicated on the commitment to professional growth and development. As the business moves forward change comes quickly, and our skills and abilities must evolve to meet the needs and expectations of a new professional standard. Especially when we consider the pace of change, we find that success is largely based on the refinement of the fundamental principles that anchor our skills and our decision making.

LPF LogoBy capitalizing on opportunities to enhance our knowledge and education, we are making an investment in our own future. To learn more about supply chain management, cargo theft and the certification process, visit losspreventionfoundation.org.

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