The working of the franchise systems solely depends on how well-managed the systems are. Planning is a major attribute that leads to successful panning out of franchise units. This includes a simplified business model, accounts and books in order, and procurement processes. Usually, the franchise owner of a particular unit or the franchisee has no role in setting up the franchise systems mentioned above. In terms of procurement, the franchise needs to provide standing instructions in order to maintain consistency in products and services throughout the franchise units. Having multiple ways that the franchisees can order their marketing collateral can waste time and money. Hence, it becomes inevitable that everything is brought under one system. A comprehensible Franchise Supply chain system is one of the necessary actions taken by the franchisor or the parent company.
The Franchise Supply chain refers to the system laid down to enable the franchise units/ franchisees to source materials economically and reliably throughout any market. This includes all stages of a product from sourcing the raw materials to the packaging and marketing.
For better management of franchise units, the franchisor enforces “full-line forcing” where the franchisor makes it compulsory for its franchisees to purchase certain goods or services from the franchisor. Meanwhile, when the franchisor designates a supplier that plan of action is referred to as “third-line forcing”.
Why Do You Need a Scalable Supply Chain?
Scaling the supply chain ensures a simplified system. The more businesses a franchisee has to deal with, the risk of jeopardizing business relationships increases multifold. Managing payments, receiving the products/ services, allotting human resources managing the procurement process, and stocking becomes complex. This in turn results in diverted focus from the business operations to resolving conflicts both in relationships as well as business books.
If franchises cannot source materials profitably, that can substantially change the economics of a franchise business. A scalable supply chain encompasses
- Making strong relationships with key suppliers, and finding the highest quality material, raw to packaging.
- Ensuring timely deliveries.
- Maintaining consistency in the line of brand requirements.
The goal is to keep it simple to mitigate the supply chain risk. For franchisees who are not directly the decision makers, it is important to adhere to the systems of the franchise to keep away from conflicts with the franchise owner. A franchisee has little capacity to influence the franchise network’s supply arrangements.
For the franchisee, it might be alluring to get a cheaper and better deal on the supply of goods and services than is being provided b the franchise supply arrangements. However, it is advised to restrain oneself from taking any steps without consulting the franchise administrators.
- The substituted products are likely to hamper the consistency. They might not meet the standards set down by the franchisor and cause inferior quality products or services.
- Reliability on the new suppliers may not be significant, leading to shortage and unavailability of products, thus affecting the revenues.
Franchise Supply Chain Management for the franchisees in a few simple steps:
- Proven market records of the assigned vendors for their reliability degrees.
- Keeping accounts of the expenses on the heads of the supply chain. This gives a reference to the amount of the capital stock being directed towards various supply chain activities such as procurement.
- Designated personnel to handle supply chain systems. This includes sourcing, procurement, stocking, and inventory management, as well as logistics.
- Being in the good books of the suppliers refers to regulating timely payments, and maintaining good business relationships with the supplier so they can inform you about shortages.
- Allotting alternate sources approved by the franchisor. At times of shortages, keep an alternate source ready so that it doesn’t affect the production line or distribution.
- Inventory checks and stocking updates help in a lot of ways.
- Encourages rotation of the already present inventory.
- Prevents overstocking and hence reduces waste occurring due to shelf-life limitations and damages.
- Adequate stocks to last during times of shortages.
Operations of multiple Franchise units require a thorough and fool-proof system, and strategic planning also engulfs the supply chain system.
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