Have you ever wondered how companies successfully fulfil customer orders and efficiently meet their demands? The answer lies in supply chain management. It is an essential process that helps organisations manage the production, storage, and distribution of products or services.
What precisely is supply chain management and how can it assist industrial units in accelerating their procedures?
In this blog post, we’ll explore the fundamentals of supply chain management and discuss how production units can use it to their advantage. So, let’s get started!
Supply Chain Management: Definition
Supply Chain Management (SCM) refers to the centralized end-to-end process of manufacturing finished products from raw materials and delivering them to the customers. This complex process includes the entire pathway the raw materials go (from inventory) to reach the customer as a product.
Starting from planning to controlling, this process involves the efficient streamlining of all supply chain operations. Supply Chain Management includes the coordination and collaboration between different stakeholders in a given supply chain, such as suppliers, manufacturers, distributors, retailers, and consumers.
Supply Chain Management is pivotal in helping companies outperform their competitors in the global marketplace. With an effective SCM system, companies can manage their inventory more efficiently, thus increasing their product delivery to market. With this effective management, they can further save costs and improve customer service.
Importance of Supply Chain management
- Effective supply chain management is essential for businesses that rely on the flow of goods, materials, or resources to deliver products or services to their customers. Understanding the importance of supply chain management can be best exemplified by recognizing the potential harm resulting from its mismanagement.
- The importance of a well-managed supply chain cannot be overstated, as illustrated by past disasters such as the 1995 Apple Power Mac debacle and the 2011 Thailand floods.
- These incidents caused considerable disruptions to the automotive and electronics industries, resulting in significant losses and damage to customer trust.
- The impact of Covid 19 is also unforgettable. To avoid similar negative impacts, companies must prioritize effective supply chain management.
- Poor supply chain management can increase labor costs due to inefficient processes. Understanding the right getaway to regulate the product supply is the real game. It enables them to create value by delivering goods, services, and information from suppliers to customers efficiently and effectively.
- Through effective supply chain management, businesses can reduce costs, improve customer service, respond quickly to market changes, gain competitive advantage, and increase profits. Furthermore, it helps to build stronger relationships with suppliers, customers, and other stakeholders in the supply chain.
- Besides, it also promotes sustainability by reducing waste and improving efficiencies. By understanding the importance of supply chain management, businesses can take proactive steps to ensure that their operations are well-managed and produce optimal results in a timely manner.
Supply Chain Management Process
Supply Chain Management (SCM) includes managing the entire production processfrom sourcing raw materials to delivering the finished products to customers. This also includes managing inventory levels, order fulfillment, warehousing, logistics, customer service, and other related activities.
The entire supply chain management process includes diverse logistics and supply chain operations. To simplify the process, we can understand it in 5 simple components:
1. Planning
Planning, the first step of SCM, is the process of forecasting demand and supply. It also involves the curation of a strategic plan for optimizing all the operations, thus ensuring that the resources meet the consumers’ demands. This includes developing strategies for pricing, product availability, capacity utilization, technology investments, resource planning, and forecasting future market trends.
2. Procurement
Procurement is the second step of supply chain management. It involves the sourcing and purchasing of raw materials from suppliers. It’s vital as supply chain managers need to source the best raw materials at optimal prices.
Besides ensuring the quality and cost of raw materials, supply chain managers need to ensure that the supplier partner has a reliable history of delivering good quality products on time. Besides, they are also responsible for maintaining better business relationships with the suppliers.
3. Manufacturing
Once the raw materials are sourced, it’s time to process them into finished products ready to be delivered to the customers. It involves activities such as production planning, product design, quality control, and inventory control.
In this process, the supply chain manager has to track, monitor and report the production processes ensuring minimal waste production and high efficiency.
4. Distribution And Logistics
Once the products are manufactured, they have to be transported from the warehouse to their final destination. Logistics is used to ensure that goods are delivered on time at the right place in a cost-effective manner.
This step includes locating the customers, closing deals, and organizing the transportation of products, thus ensuring safe, inexpensive, and on-time delivery. Supply chain managers need to ensure the use of diverse distribution and logistic methods to prevent any unprecedented delay arising from unforeseen circumstances.
For example, let’s say a supply chain manager is expecting to deliver shipments during the holiday season, but there’s an unexpected snowstorm that shuts down ports and airports. In such a situation, an alternate distribution method will prove fruitful, thus avoiding unnecessary delays and negative customer feedback.
5. Returning
Supply chain management is incomplete without proper support for returning the products. The return process (also known as reverse logistics) is to identify the underlying reason behind the return and to assign refunds to the customer properly and efficiently.
The underlying reason behind the return, when discovered, must be addressed well. Although returning is another interaction between the customers and the company, managers need to ensure that the customer has been apologized to and that his reason behind the return is addressed. This is to avoid future persistent returns and offer better customer service.
Objectives and Purpose of Supply Chain Management
The effects of the pandemic have caused many organizations to rethink their supply chain strategies. Many of the survey respondents reported modifying their existing supply chains in response to COVID-19.
This emphasizes the importance of setting and managing clear objectives when it comes to supply chain management, as this can be a powerful tool for businesses to remain competitive in challenging times. Let’s understand the core objective of a supply chain :
- Being Adaptable And Responsive
A supply chain must respect the change in demands of the customer. The objective is to establish an agile and adaptable supply chain to swiftly accommodate alterations in demand, supply, or customer needs.
- Maximizing Efficiency While Minimizing Costs
Supply Chain Management effectively minimizes costs by optimizing production processes and upholding quality standards. Amazon has deployed cutting-edge technologies like machine learning and artificial intelligence to optimize its supply chain.
It ultimately increases efficiency and decreases costs. Forbes reported that Amazon had incorporated robots and automation into their shipping warehouses, further streamlining processes while reducing expenses.
- Fostering Cooperative Partnerships
Supply chain management aims to build collaborative relationships that enable smooth communication, cooperation, and coordination between supply chain partners. To help facilitate this, the system can automatically log orders to quickly alert other facilities of any additional resources needed for a streamlined process.
- Efficient Stock Control
Supply Chain Management aims to strike the perfect balance between inventory levels, ensuring products are always available while avoiding unnecessary accumulation and eliminating overstocking.
- Improving Client Contentment
An effective supply chain is essential for customer satisfaction, as it enables more competitive pricing, faster delivery, and increased profitability. Optimal operational performance is key to the meeting – or even exceeding – customer expectations.
Functions of Supply Chain Management
Supply chain management involves strategic planning and execution from their point of origin to the end consumer. It encompasses all activities required to ensure the timely delivery of goods and services efficiently and cost-effectively. This includes all the core supply chain management functions. Let’s take a closer look:
- Sourcing and Acquisition: This function involves obtaining goods and services from external sources, which includes sourcing vendors, negotiating contracts, and managing vendor relationships. It involves the process of locating and acquiring the materials necessary for an organization to operate efficiently.
- Inventory management: This function involves managing the organization’s inventory levels to ensure that they remain at optimal levels, with sufficient stock availability, to avoid inventory shortages or excess stockpiling.
- Transportation: This function involves overseeing the transportation of goods from their source to their destination, including selecting carriers, determining routes, and controlling costs.
- Warehousing: This function involves the strategic management of goods in warehouses or other storage facilities. It ensures selecting of appropriate locations, determining necessary storage requirements, and monitoring inventory levels.
- Demand planning: This involves studying past events, market trends, and customer preferences to anticipate future demand for products and services. The core analysis and research are done under this function.
- Production planning: This task involves planning production schedules to meet customer demand while balancing production capacity, determining production schedules, and managing associated costs. This section is mostly responsible for the flow of products.
Benefits of Supply Chain Management
From improving efficiency to sustainability, supply chain management is very beneficial for companies and supply chain managers. Here’s a detailed overview of the benefits of supply chain management :
- Improved efficiency: Supply chain management helps to reduce expenses connected with manual activities as well as human errors by streamlining processes and automating tasks. Companies can function more efficiently and cost-effectively.
- Increased visibility: Companies can use supply chain management systems to monitor inventory levels and order statuses in real-time. This increased visibility enables companies to plan more effectively, respond more quickly to changing customer demands, and spot problems before they become too costly.
- Improved collaboration: Supply chain management solutions can provide a platform to all stakeholders throughout the supply chain to share information, collaborate on solutions, and coordinate activities. This improves communication and helps to ensure everyone is working together towards the same goal.
- Enhanced customer service: By streamlining processes and providing better visibility into the entire supply chain, organizations can offer improved customer service by responding faster to orders and requests.
- Increased sustainability: Supply chain management solutions can help businesses to reduce their environmental impact by promoting efficient operations, reducing waste, and using sustainable materials.
What Is QodeSETU? How Does QodeSETU Help in Supply Chain Management?
QodeSETU is a powerful traceability engine that helps in supply chain management by generating marks and scanning digital twins of finished goods and raw materials. It bridges suppliers, manufacturers, supply chain partners, dealers, retailers, and consumers to provide real-time tracking of products throughout the supply chain with improved traceability and increased efficiency.
The ability to generate marks and scans of finished goods and raw materials throughout the supply chain can help businesses gain greater transparency and traceability. Additionally, its integration with ERP systems, COMM tools, and other software can help streamline operations and reduce costs. Moreover, SETU Line modules are available for various production line setups, from manual to fully automated, helping businesses meet their production goals.
With the support of QodeSETU’s team of experts and its advanced technology, businesses can now gain unparalleled visibility into the entire supply chain network. This allows them to reduce costs, eliminate errors, improve product quality and compliance with regulations, reduce the risk of recalls due to incorrect adherence to standards, and increase customer satisfaction. QodeSETU is the ideal partner for businesses looking to make their supply chain operations more efficient and effective.
FAQ: Supply Chain Management
What is supply chain management?
Supply Chain Management (SCM) refers to the centralized end-to-end process of manufacturing finished products from raw materials and delivering them to the customers.
How does QodeSETU help in supply chain management?
QodeSETU is a traceability engine for supply chain management that generates digital twins of goods and materials, connecting all supply chain partners and providing real-time tracking. It improves traceability and efficiency.
What is Returning in supply chain management?
Returning involves the process of identifying and addressing the root cause of a customer’s return. The firm should properly refund their purchase and provide better customer service. This all comes under the process of handling returns.
What is the potential harm of mismanaging a supply chain?
Mismanagement of the supply chain can lead to devastating consequences, including financial losses and a decrease in customer loyalty. Such disruptions can have far-reaching impacts on the industry, so proper management is essential.
How can supply chain management improve client satisfaction?
Supply chain management can help to enhance client satisfaction by providing competitive pricing, faster delivery, and improved profitability through optimized operational performance that meets or exceeds customer expectations.
Conclusion
Supply chain management is an essential part of modern business operations. It helps in optimizing resources and ensures efficient production and delivery of goods. The process includes various activities like forecasting, inventory control, procurement, transportation, and storage.
By understanding how it works and how to implement strategies for improving it, production units can improve their performance and increase their profits. With the right strategies in place, supply chain management can help production units stay competitive and take their business to new heights.
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