What Is Supply Chain Management?
Supply Chain Management (SCM) refers to all the different activities you’re going to need to plan, control and execute the complete journey of a product, this includes purchasing raw materials, production, and the distribution that includes the customer receiving an order – the end goal of getting it done in the most efficient, cost-effective way.
For any company that wants to compete in global and international markets, they must be effective and efficient with their supply chain and throughout the company’s networks.
Supply chain management is going to include the planning and execution of many different processes that must be built to optimize the flow of materials, information and financial capital in the areas that broadly include demand planning, sourcing, production, inventory management and storage, transportation, or logistics, and returns when excess or defective products are found.
Supply chain management also integrates supply and demand management within the company and incorporates many companies of the chain. It can include numerous self-organizing networks of businesses that work with one another to provide service and product offerings to their customers. This is where teamwork can make the dream work.
There’s a lot of moving pieces with SCM, companies need to have the right software and strategies in place if they want to gain a competitive advantage over the competition.
Supply Chain Complexity
The most basic level of a supply chain includes a company, their suppliers and the customers they serve. As an example, the chain could look like:
- Producer Of Raw Materials
- The Customer
This is your most basic level of the supply chain in action.
When you begin diving deep into a complex supply chain, it can include a lot of different things. A complex supply chain could include many suppliers, even suppliers to suppliers. It can include providers such as third-party logistics (3PL), supply chain software providers, financial companies, even collecting goods for recycling. It can include many organizations, what ever is required to ensure customers are getting the products they ordered.
Supply chain management is complex, it relies on a number of different partners to run and operate at the highest of levels. Manufacturers, suppliers and fulfillment, it takes an equal effort from all parties to stay organized and completing tasks. Due to this, effective supply chain management also requires risk management, resources, change management, collaboration, and technology to make sure all parties involved are working toward the same goals.
Supply chain sustainability covers social, legal and environmental issues, as well as sustainable procurement too. All of these are closely related, focused on the pillar of corporate social responsibility, which analyzes a company’s effect on the environment and their social well-being.
It’s no secret, when you have such complex processes in place, things can happen. There’s a lot of things that a company should be aware of. For example, if a new product launch is a huge hit, it can hurt the supply chain trying to get new product in place to take advantage of the growing demand. On the other end, a new product can be released and that may cut demand for the older version of the product. If you have new products launching all the time, it’s going to be a challenge.
You could also have to deal with seasonal holidays, which is usually a stressful period for retailers anyway – trying to keep products in stock during the holiday season can be a daunting task for many. Weather events can also play a role in your supply chain, natural disasters, and everything in between, so you have to plans in place for these types of events.
Supply Chain Management Concept
Every product created that ends up in your customer’s hands are a joint effort of multiple companies. These companies make up the supply chain.
Just a few decades ago, not much was known about managing the supply chain. Supply chains have existed for a long time, but few companies have the ability to manage their whole supply chain. It wasn’t until the mid 1990s that supply chain management began to surface,
By definition, supply chain management is a cross-functional approach that includes managing the movement of materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and to the end customers.
Supply Chain Management Versus Logisitcs
A lot of people often get supply chain management and logistics confused or use it together.
While logistics is a component of the supply chain, it focuses on moving the product to the appropriate destinations. It manages activities such as packaging, transportation, distribution, warehousing and delivery.
As for supply chain management, it focuses on an expanded set of activities. SCM involves activities such as getting the best prices on goods and materials, as well as, coordinating supply chain efforts across the supply chain network of partners.
Benefits Of Supply Chain Management
There’s a wide range of benefits you can get utilizing supply chain management.
It boosts collaboration, increase profits, lower cost and help your company become more efficient.
Managing your supply chain helps you better manage demand, focus on carrying the right inventory and deal with disruptions efficiently. Entrusted with the right strategies, systems and software, supply chain management can help you in a lot of areas.
Supply chain management has a number of different benefits for your company. It can help a company find efficiencies and solve them, it can also help increase profits, lowers costs, and boosts collaboration.
SCM is vital to your business as it gives companies the ability to efficiently manage demand, carry the right amount of inventory, adequately deal with disruptions, keep costs to a minimum and meet customer demand in the most effective ways possible. These SCM benefits are achieved by using the right strategies and software to help manage the growing complexity of today’s supply chains.
Why Supply Chain Software Is A Necessity
We’ve yet to work with a company that doesn’t want a competitive advantage over the competition, your supply chain is an area you can optimize for performance. We live in a technological world, use it to your advantage, using the right supply chain software will play a key role in your future success. ERP vendors do offer a wide variety of solutions that will give you the ability to focus on key areas of your supply chain. You’ll also find business software vendors that solely focus on SCM.
Supply chain management software consist of modules and tools that are used to execute supply chain transactions, control business processes and manage supplier relationships. Having this software in place is key to management.
There’s a few key solutions you may want to consider.
- Supply Chain Visibility Software – This can help you spot and analyzing risk, also giving you solutions to manage suck risks.
- Supply Chain Planning Software – This is a great software to use that will help you better manage your demand.
- Inventory Management Software – Gives you the ability to track all of your inventory and optimize inventory levels at will.
- Supply Chain Execution Software (SCEM) – Helps with your day-to-day manufacturing operations. It considers all possible events and scenarios that could disrupt your supply chain.
- Logistics Management Software – Gives you the ability to track the transport of goods, even globally.
Here in 2022, your supply chain plays a bigger role than ever before.
The growth of ecommerce and the demand to get products to your customers as quickly as possible has fueled the expectations of today’s supply chains. While there’s an endless array of options, it also brings up new challenges for your company. Are you equipped to handle them? Optimize them? Shift certain areas of your supply chain?
You’ll soon learn there’s a number of different pillars where your SCM can make positive ground, cost can be cut, and the input of productivity increased. While you may have a lot to gain, there’s also going to be challenges you’ll face head-on. This is why the right “technology” and “data” is invaluable – that’s why you should always take your time making a decision.
Technology, especially big data, predictive analytics, IT technology, supply chain analytics, robotics and autonomous vehicles, all of these are being used to solve those challenges, reduce risk and avoid disruptions to your supply chain. If you’re not using it for yourself, your competition may be. Can you take that risks?
Additional Terms Related To The Supply Chain
Here’s a few more terms you want to get familiar with that relate to the supply chain.
- Value Chain Definition – A value chain is a tool that analyzes all the activities a business uses to create a service or product.
- End To End – The end-to-end term refers to solutions or products that cover the entire length of a specific process.
- Operations Management – This is the administration of best business practices to create the highest level of efficiency possible within the company.
- Inventory Management – This is the process of ordering, storing, tracking and using a company’s inventory.
- Project Management – Project management involves organizing and planning a company’s resources to move a specific task, process or event toward completion.