The supply chain includes all the activities, people, organizations, information, and resources required to move a product from inception to the customer.
There are various explanations of the term supply chain:
- The concept of the supply chain, encompassing the process of moving a finished good from procurement to fulfilment in a cycle.
- The industry, which includes the carriers and regulations that oversee transporting goods.
- The function, which is the practice of managing the operations, logistics and inventory levels as part of coordinating the buyers and suppliers.
What is Supply Chain Management?
Effective and Efficient supply chain management involves the integration of supply and demand management not only within the organization but also across all members and channels of the supply chain to maximize collaboration.
A supply chain management system comprises of five fundamental components:
- Planning: To meet customer demands, supply chain managers have to plan ahead. This means forecasting demand, designing the supply chain and determining how the organization will measure the supply chain to ensure if, it is performing as expected in terms of efficiency, delivering value for customers and helping to achieve organizational goals.
- Sourcing: The procurement of suppliers who can offer the necessary goods, raw materials, or services for producing the final product is a crucial element of the supply chain. This involves not just establishing contractual agreements with the suppliers, but also supervising and evaluating ongoing partnerships.
- Making: Supply chain managers also need to help coordinate all the steps involved in creating the product itself such as reviewing and accepting raw materials, manufacturing the product, quality testing and packaging.
- Delivering: Logistics is a crucial aspect of supply chain success as it ensures the products are delivered to the customers. This involves managing orders, scheduling deliveries, dispatching, invoicing, and receiving payments. To transport the products from overseas manufacturers to customers’ doorsteps, a fleet of vehicles must be coordinated, including tankers, fleet trucks, and parcel services for last mile delivery
- Returning: Supply chain managers also need to develop a network that supports returning products. In some cases, this may include scrapping or re-producing a defective product; in others, it may simply mean returning a product to the warehouse. This network needs to be responsible and flexible to support customer needs.
Why Supply Chain Management is Important?
Supply chain management is crucial for any organization because doing it well can introduce several benefits to the organization; however, poor supply chain management can result in very expensive delays, quality issues, or reputation. In some cases, poor supply chain management can also cause legal issues if suppliers or processes are not compliant. With supply chain management, organizations can: Be proactive in identifying potential issues, adapt pricing accordingly in real-time, and optimize inventory management.
What are the benefits of Supply Chain Management?
- Lowered Cost: By integrating suppliers and applying technology, organizations can lower operating costs by responding more dynamically to customer needs. For example, managing based on demand keeps organizations from over-producing, which not only reduces labour and raw materials costs, but also cuts down on inventory management costs and transportation costs.
- Increased revenue: Organizations can use technology to respond quickly to customer demand, like Walmart keeping shelves stocked. This helps ensure products are available for customers to buy. By streamlining manufacturing to produce just enough, labour and materials can be used to develop new items and expand the product mix. Additionally, organizations can offer more services to customers.
- Asset utilization: With effective supply chain management, organizations can use capital assets, like production or transportation equipment, most effectively. Supply chain management allows organizations to deliver more quickly, ensure products are available, reduce quality issues, and navigate returns with ease, ultimately improving value, both within the organization and for the customers.
The importance of effective supply chain management cannot be overstated. A poorly managed supply chain can have a devastating impact on a business’s performance and its relationship with customers. Therefore, any changes to the supply chain should be implemented in a well-planned, timely manner with minimal disruption. Providing transparent service to customers is equally crucial. Customers need to be informed about any potential delays or early arrivals so they can adjust accordingly and maintain confidence in the business. By prioritising efficient and transparent supply chain management, businesses can ensure smooth operations and satisfied customers.
How to successfully Manage Supply Chain Operations
Good communication is important for a successful supply chain. It makes things easier and more transparent. To manage a supply chain well, you need to make sure everything works well together and is more transparent. To manage a supply chain well, you need to make sure everything works well together. This means using technology to reduce work and make things run smoothly. To transport goods efficiently, you need a good system of addresses. You can use transportation or shipping solutions to make this happen.
