What is Supply Chain Management?
Did you know when you place an order, most of the time your package doesn’t come directly from the company’s warehouse to your doorstep? For your packages to reach safely, each product goes through a wide network of retailers, manufacturers, suppliers, and distributors. This process is called an effective supply chain management.
If you’re interested in gaining a better understanding of SCM, then you’ve come to the right place. In this blog, we have discussed what is supply chain management (SCM), the five phases of SCM, the technology it relies on, and the key benefits of SCM.
What is Supply Chain Management? An Overview
Supply chain management is the process of managing a company’s entire production process, from sourcing raw materials to delivering a finished product to the consumer. This process involves a wide network of manufacturers, wholesalers, retailers, distributors, and suppliers to ensure the efficient manufacturing and distribution of quality products. Effective SCM includes a smooth coordination between internal resources, operations management, and external suppliers.
Hence, understanding the supply chain management definition is essential for ensuring the effective delivery of goods and services to customers, which results in strong brand loyalty.
5 Phases of Supply Chain Management
Supply chain management (SCM) is essential across various industries, as it involves the production and transportation of goods from warehouses to consumers. To simplify this complex process, we can break it down into five key phases.
Now that we’ve covered the supply chain definition, here are the essential phases that ensure the successful production and delivery of finished products.
i. Planning
The first step of effective SCM is planning. It entails aligning the supply requirements with the customer’s demands. Companies must prepare for both long-term and short-term goals along with plans for unforeseen circumstances. Planning generally involves:
- Considering the raw material requirements during each phase of production.
- Evaluating machinery and tool capacity.
- Identifying staffing requirements.
Several large companies use enterprise resource planning (ERP) to streamline this process smoothly, ensuring that all aspects of production are well-coordinated.
ii. Sourcing
Sourcing focuses on building a reliable network of suppliers to secure high-quality raw materials. This is especially important while working with perishable goods. The most vital factors about sourcing include:
- Ensuring each raw material meets the manufacturing specifications.
- Negotiating the prices paid to suppliers, while ensuring they’re within industry standards.
- Verifying the supplier’s ability to supply emergency materials in case of an unforeseen circumstance.
- Evaluating the supplier’s track record for timely deliveries and high-quality goods.
iii. Manufacturing
This is one of the most essential elements of SCM. It involves utilizing labor and machinery to transform raw materials into finished goods. This process consists of several sub-steps, including:
- Assembly of raw materials.
- Testing to ensure they are of high quality.
- Inspection of the finished product and its final packaging.
Throughout, this process companies are required to supervise the process thoroughly to ensure there are no errors in the products and to oversee the production of waste.
iv. Delivery
Delivery encompasses the distribution of finished goods to customers. It involves overseeing logistics, warehousing, distribution centers, and order fulfillment. Effective delivery ensures that products reach consumers efficiently and on time, contributing to overall customer satisfaction.
v. Returns
The final phase, returns, addresses the management of defective or expired products. This includes overseeing reverse logistics, ensuring customer satisfaction, and managing the disposal of expired/unusable products. A well-organized returns process is essential for maintaining customer trust and improving overall service quality.
Note: If you’re looking to build a successful career in supply chain management, consider enrolling in a supply chain logistics course with placement guarantee. This course will provide you with hands-on, project-based learning to help you land a job in the fied of supply chain.
Technology Used in Supply Chain Management
To keep track of a network of suppliers and consumers, several companies have integrated modern technologies to enhance customer experience. These tools make the process much smoother and faster. Having understood supply chain management’s meaning and key phases, here are some of the tools used in SCM.
i. Internet of Things (IoT): IoT devices like RFID tags and sensors help in gathering real-time information on inventories, shipment tracking, and asset performance. Several warehouses have included smart features such as automated storage, robotic pickers, retrieval systems, and drones for inventory management.
ii. Artificial Intelligence and Machine Learning: AI and machine learning have significantly improved customer satisfaction, foreseen a rise in demands, and have helped companies optimize production accordingly. AI-driven chatbots have also contributed to the user experience and have made navigating easier for users. Meanwhile, machine learning algorithms help in identifying bottlenecks, improving visibility, and optimizing routing across all operations.
iii. Blockchain: Blockchain technology improves the traceability, transparency, and security of SCM systems. Its decentralized and immutable ledger helps in dealing with counterfeiting, improves product safety, and simplifies compliance processes.
iv. Innovative Developments: Recent advancements like 5G technologies have streamlined a more reliable and faster data transmission, that has helped in accelerating IoT devices and real-time monitoring systems. Some companies have started including autonomous vehicles and drones in their SCM process to reduce transportation costs.
v. Industry 4.0: The emergence of Industry 4.0 signifies a digital transformation in manufacturing processes. The entire process includes advanced technologies such as cloud computing, advanced data analytics, cyber-physical systems, and augmented realities. With the introduction of robotics and 3D printing companies can now enhance their production and warehousing efficiency. Industry 4.0 contributes to faster decision-making, unprecedented levels of customization, and increased automation.
Key Benefits of Supply Chain Management
Over the years SCM has positively impacted businesses by optimizing operations, and cutting costs while enhancing the customer experience. Here are some of the additional ways through which supply chain management has contributed to the modern business landscape.
i. Asset Utilization: Effective supply chain management allows organizations to optimize the use of capital assets, such as production and transportation equipment. By aligning production with demand, businesses can avoid unnecessary wear and tear on manufacturing equipment and operate more efficiently. Supply chain management enables organizations to accelerate delivery, ensure product availability, minimize quality issues, and streamline returns, ultimately enhancing value for both the organization and its customers.
ii. Lowered Costs: Integrating suppliers and leveraging technology enables organizations to reduce operating costs by responding more effectively to customer needs. For instance, demand-driven management prevents overproduction, reducing labor and raw material expenses while also lowering costs associated with inventory management and transportation.
iii. Increased Productivity: Supply chain management enhances productivity through tools like Enterprise Asset Management (EAM) systems and predictive maintenance. These technologies enhance the efficiency of machines and systems, helping to eliminate bottlenecks, streamline workflows, and increase productivity. Additionally, automated processes and real-time data analysis contribute to quicker shipping and delivery times.
iv. Better Customer Satisfaction: With numerous competing companies, effective SCM is crucial for enhancing customer satisfaction. SCM ensures companies incorporate customer feedback and keep up with changing trends to support micro-fulfillment and large-scale personalization.
v. Improved Product Quality: SCM ensures that customer feedbacks directly reach research and development teams. This helps in enhancing the product design and development that are focused on customer needs. By leveraging machine learning insights and analytics, companies can ensure an enhanced customer experience and maintain brand loyalty.
Conclusion
Understanding what is supply chain management can help you ensure the smooth functioning of all critical aspects of SCM, such as sourcing and distributing. Whether you are a student, or a passionate person planning on starting your enterprise, this blog can help you gather all important knowledge regarding supply chain management. Moreover, if you are planning to understand SCM in-depth, you would also need to understand product management.
Check out our comprehensive blog on the scope of production management and understand all crucial factors associated with it.
FAQs
Supply management refers to the process of finding, procuring, and managing the resources and suppliers that are critical for an organization’s operations. It helps in maintaining the flow of goods and services from the company to the customer. It also includes managing finances and data associated with a service or product from the procurement of raw materials to ensuring successful deliveries.
The role of SCM is to coordinate and optimize all activities involved in the production and distribution of goods. These activities include sourcing raw materials to delivering finished products to consumers. It also includes managing relationships with suppliers, overseeing logistics, ensuring efficient production processes, and enhancing customer satisfaction
The five basic steps of supply chain management are as follows:
a) Plan: Prepare and forecast demand and develop strategies to manage resources and operations.
b) Source: Identify and manage suppliers for raw materials.
c) Manufacturing: Convert raw materials into finished products.
d) Deliver: Distribute products to customers through logistics and fulfillment.
e) Return: Manage the return of products for exchanges or repairs.
Studying supply chain management is important because it helps organizations improve operational efficiency, reduce costs, enhance customer satisfaction, and gain a competitive advantage. Understanding SCM allows businesses to streamline processes, mitigate risks, and respond effectively to market changes
The 7 C’s of supply chain management is a way of managing logistics that can help the company function smoothly. They are as follows:
a) Connect: Maintaining strong relationships with suppliers, retailers, and partners to ensure successful SCM.
b) Create: Innovation that improves operational efficiency and helps in cutting costs.
c) Customize: Tailoring services to customer needs to ensure returning clients and improve brand loyalty.
d) Coordinate: Coordinating with clients, schedules, and routes to maintain operational efficiency.
e) Consolidate: Maximizing the use of available resources and capacity.
f) Collaborate: Working closely with several industries, such as the trucking or shipment industry to ensure timely deliveries.
g) Contribute: Adding value to the industry and society in general by adopting sustainable SCM practices.
