How Modern Supply Chain Management Works
A supply chain comprises all of the organizations involved in a particular business that is necessary for it to run smoothly. Demand planning, production planning, raw material providers, sourcing and procurement, the manufacturing process, warehousing, and transport of finished goods all make up the supply chain. Disruptions or shortages in one part of the supply chain can affect all of the links further down, breaking the connections that an efficient supply chain requires to operate smoothly.
Supply chain management (SCM) is the process of managing production, inventory, and suppliers to create a smooth and efficient flow of goods and services. The product moves through the supply chain activities from raw materials to the final customer, who may be an individual or another company. So, what is supply chain management — and why is it beneficial to your business?
Supply Chain Management: Its Role in Business
The primary role of supply chain management in business is to ensure that materials and information flow smoothly, efficiently, and on time through a series of activities, processes, operations, and services. The objective is to optimize value by managing costs, quality, and time throughout the entire life cycle of products or services. The idea of supply chain management as a business process that could give a company a competitive advantage was first introduced in the 1980s and flourished through the 1990s.
The most important benefit the supply chain management process provides for both companies and consumers is improved customer satisfaction. For example, a consumer who receives their order quickly is more likely to make repeat purchases from the same supplier compared to another supplier who must wait weeks for delivery due to poor planning or inadequate inventory levels within their supply chain route.
Key Components of Supply Chain Management
Just as a supply chain is made of multiple parts functioning together, supply chain management is also composed of components that must work together. The five main parts of supply chain management are planning, sourcing, manufacturing, transport/delivery, and returning.
The first part of supply chain management is planning to align production with both manufacturing needs and customer needs. Planning covers everything from forecasting staffing levels to inventory management of available materials in distribution centers.
Next is sourcing the supplies and raw materials required for the manufacturing process. This requires working with multiple vendors and distributors of materials, as well as coordination and optimization so that materials with different lead times will arrive at the same time. It’s important in supply chain planning to establish partnerships with different vendors if there is an issue or delay in materials so that even if there is a disruption, the entire process will have a minimal disturbance.
The third is the manufacturing of the product. This part not only involves making a product, but accepting delivery of the raw materials, quality testing, and packaging of the final product for delivery.
After manufacturing is delivery of the finished product. The final destination could be another manufacturer or a retail location. Transport involves accepting payment for orders, scheduling deliveries, and coordinating deliveries to meet customer demands.
Although businesses strive to ensure their products provide a good customer experience, returns will be inevitable. There must be a system in place in your supply chain network for returning products that are defective, unwanted, recalled, or in some way did not meet the customer’s expectations. This component also must include gathering data on why a product was returned to help inform the previous four parts of the supply chain.
The Benefits of Effective Supply Chain Management
Supply chain management benefits your business in a variety of ways. The most important benefit is increased productivity, which means that your business can do more work with the same amount of resources.
Lower costs are also a result of effective supply chain management. When you decrease waste and increase efficiency, fewer resources are needed to complete tasks, reducing expenses like labor costs, raw materials, and energy consumption. This translates into reduced prices for consumers and increased profits for your business.
Improved customer satisfaction is another benefit of supply chain management because it allows you to offer better products at competitive prices while providing excellent customer service through efficient delivery times and accurate orders. In addition to attracting new customers or keeping current ones loyal by improving this aspect of your business model, high customer satisfaction also reinforces a positive image within your industry as others see how well-executed systems translate into improved service levels for both consumers and suppliers alike!
Supply Chain Management and Sustainability
It’s a key component of sustainability. The supply chain is responsible for the product’s lifecycle, from raw materials to final use and disposal. This means that it has the power to reduce environmental impact and improve social conditions at every step along the way. By integrating sustainability into its practices (as well as communicating with its stakeholders about its efforts), an organization can make positive change on a global level.
Supply chains are complex systems with many moving parts; there’s no one-size-fits-all approach. Each company’s needs will be unique based on their industry and business model; it’s important not just to identify where improvements are needed but also how they’ll work within your own context before making any changes in policy or practice!
Supply Chain Management and the Future
Supply chain management is a critical aspect of any business. It helps to ensure that you have the right supplies and equipment for your operations to keep up with demand. Poor supply chain management leads to serious issues such as delays or even a complete shutdown of your facility due to a lack of inventory. This is even more critical as global supply chains recover from the strain of the recent pandemic. If you need a supply chain partner that has your needs in mind, contact the supply chain professionals at Real Time Intelligence. We work with businesses on solutions like asset tracking, management, and visibility. Contact us today!