Supply chain management is one of the most important functions of any business. It helps streamline the entire process as it is responsible for everything from procuring raw materials to delivering the product to the customer. In this blog,
we will look at a few different aspects of supply chain management including the basics of supply chain management, the elements of supply chain management, supply chain management for consumer goods, and a few other relevant topics.
The world’s best businesses are discovering a unique competitive edge. Those coordinated actions that deliver the product to the market and produce happy consumers are known as supply-chain management.
Basics of supply chain management
All the elements that make up the supply chain are connected and play an essential role in producing and distributing a product. Another way of putting it is that a supply chain is a collection of companies linked by a common aim. A product or service’s journey from the source to the retailer/end client may be a part of their separate functions.
There is a supply chain for every firm, even service-based companies.
Supply chain networks include the whole process of transforming raw materials and components into completed goods that consumers want. Supply Chain Management is all about keeping track of and improving that network.
What is meant by supply chain Management?
To transform raw materials into completed goods or services and distribute and deliver those goods or services to partners and consumers, supply chain management is necessary.
In addition to planning, supply chain management includes information and capital transmission and control across the supply chain. This discipline is all planning, sourcing, manufacture, delivery, and refunds.
What are the benefits of Supply Chain Management?
Managing the supply chain has become a primary responsibility for businesses as they appreciate the need for an effective and robust supply network. It makes sense to look at and improve all of the processes involved in delivering a product or service to the end client to keep costs down, which builds customer loyalty and helps a business stand out from the crowd.
A well-executed supply chain lowers waste because it keeps supply and demand in sync. When all parties are in sync, they can prevent situations that produce extra expenditures or annoy consumers and lead to lost sales, such as overstocks or out-of-stocks.
Three Flows in Supply Chain Management
For a specific product or service, supply chain management creates linkages between all the organizations that make up the supply chain. For the most part, products and services aren’t produced by a single firm but are instead assembled by a team of enterprises.
You may quickly grasp supply chain management by separating physical movement from information movement.
Physical flow
A company that sells items must figure out the best method to obtain resources and then pass them on to the next step in their supply chain. Some supply chains may skip or condense some of these processes. Still, the actual movement of products starts with raw materials being sourced by a supplier and moving on to the manufacturer, distributor, retailer, and eventually the end consumer.
Preparation and coordination are needed at each stage to get the physical objects to the following location and keep them for some time.
Information Flow
All parties involved in the supply chain must see exactly where their products or services are, at any given time. To schedule production runs and manage inventory, the supplier depends on purchase orders from manufacturers.
Because of this, distributors should be aware of the kinds and amounts that will be sent and when they will arrive at their customers’ locations.
Continuous communication between all parties engaged in a supply chain, including information on delays, shortages, and other changes, is essential to its successful operation. Supply chain management software is vital to keep track of all this information.
Financial Flow
Advantages of Supply Chain Management
There are many advantages of Supply Chain Management which include:-
Customer satisfaction:
Supply chain management reduces an organization’s risk of running out of a desirable product. Maintaining a good relationship with your consumers is an excellent way to keep them coming back for more. As supply chains are optimized, companies may also discover methods to send items more quickly and at a lower cost, resulting in savings for their customers. As a final benefit, clients can monitor the progress of their purchases at any given moment.
Fewer issues:
One of the critical purposes of Supply Chain Management is to improve the quality of products and services. If a business discovers that a particular supplier or courier has a disproportionately high percentage of damaged shipments, it can engage with the partner to improve its quality assurance procedures.
Customers will be pleased to see visible improvements in quality, and service teams will be pleased to recover back the time and money they spent fixing quality-related problems. Effective supply chain management reduces product recalls and litigation that can harm your brand’s image for years.
Less Costing:-
Supply Chain Management aims to increase efficiency, which reduces costs. A corporation that can precisely forecast demand will not overpay on the stock.
That increases cash flow since less money is held in inventory, and corporations see decreased manufacturing, shipping, and inventory carrying expenses due to reduced inventory holding costs. Businesses can increase output and reduce labor expenses by using more efficient procedures.
Strong Supply Chain:
A company’s total value chain is visible to all stakeholders when Supply Chain Management is appropriately implemented. There are ways in which CFOs can assess the financial effect of a scarcity of a critical component or a decline in sales of a particular product.
The most important thing is that the firm is given a prior warning to respond swiftly and prevent a drop in income or an increase in missed orders to consumers while keeping its partners updated. When a natural catastrophe, disease outbreak, economic instability, or other event disrupts the supply chain, those with well-defined SCM policies are in a far better position to change gears swiftly.
Waste Reduction:-
Optimized buying and production will reduce waste in the supply chain. As a result of an accurate demand plan, less inventory must be disposed of. If you master supply chain sustainability, you’ll produce and transport fewer unneeded products. This reduces a company’s environmental effect, becoming more essential to customers.
Upper Hand on Competition:-
Supply Chain Management activities aim to improve a company’s market position. Benefits like cheaper costs, better customer service, or a more robust supply chain can help a company stand out from its rivals. This can be achieved by using the advantages listed above. Only then will the company acquire market share and see its bottom line expand.
Why is supply chain management used?
Retail purchases in several sectors generate replenishment requests to manufacturers. Manufacturers with a very well, a punctual supply chain can refill shop racks automatically when items are sold. Extra information from supply chain partners has allowed organizations to employ sophisticated analytics to enhance performance as cooperation has grown.
Several examples are as follow:
Detecting future issues before they arise:
The usual approach to a client ordering more items than the manufacturer can supply has been to cut the order in half. As a result, the consumer feels insignificant and believes the manufacturer’s service is inadequate. Businesses that foresee a shortage before a customer is dissatisfied may very well be able to provide an alternative product or other incentives to keep the customer pleased.
Dynamic pricing optimization.
Seasonal items, especially fashion items, have a shorter shelf life. Any items that do not sell before the end of the season are discarded or sold at a significant discolor to clear the warehouse. Airlines, hotels, and other businesses that sell a limited, perishable commodity modify their pricing on the fly to match demand. While this is more challenging with apparel and other items with a broad range of supply, comparable forecasting approaches may help boost margins.
Improving the distribution of inventory that is available to promise:
Today’s technologies dynamically allocate resources and plan work based on sales forecasts, actual orders, and promised raw material deliveries. Manufacturers may verify a product delivery date when an order is placed, reducing the number of mistakenly filled orders.
Elements of Supply Chain Management
Supply chains that are well-managed can be assessed in several ways. Organizations may use metrics to help them concentrate on the most critical operations and enhance current processes. Regulatory compliance, safety, and contractual duties are all supported by essential metrics. Other measures track and improve efficiency, customer service, and profit margins.
The following are some examples of standard metrics:
Perfect orders: The proportion of orders free of errors.
The time it takes to get from cash to cash is between paying for raw materials and receiving payment for the finished output.
Time to complete an order cycle takes from when an order is placed to when the product is delivered.
The proportion of items delivered precisely as requested on the first shipment is known as the fill rate. There are hundreds of supply chain metrics to choose from. Finding the appropriate ones for your sector and company is the art.
Logistics vs. Supply Chain. Know the difference!
According to some, both the terms are considered the same.
Often the usage of the term is seen when we move from one country to another. For example, the term “Supply Chain Management,” used in the US, is known with the name Logistics Management in Europe.
But before getting into the differentiation, let us know what logistics is?
In general, logistics refers to the careful planning and execution of a complicated task. Logistics is the management of the movement of goods between both the point of origin and the point of consumption to suit the needs of consumers or organizations in a broad sense. In logistics, physical products such as materials, equipment, supplies, and food, and other consumable things are handled.
Significant differences between the two.
It’s essential to understand that, although the concepts aren’t interchangeable, they do support one another. One process can’t occur without the other. Here are some significant distinctions between the two words that will assist you in avoiding conflating the two.
Supply chain management connects significant business operations inside and across organizations to create a high-performance business model that generates a competitive advantage.
The transportation, storage, and flow of commodities, services, and information inside and beyond an organization are logistics.
The primary goal of the supply chain is to gain a competitive edge, while the primary purpose of logistics is to fulfill consumer needs.
Logistics is a phrase that has been around for a long time, originating in the military, although supply chain management is a newer one.
Within the supply chain, logistics is an activity.
Several corporate goals can be achieved with the aid of supply chain management. It’s possible to reduce the danger of recalls and damages by improving product quality via better management of production processes. Customer service may be enhanced by preventing expensive shortages or times of inventory overstock by controlling delivery operations.
In general, supply chain management offers many chances for organizations to boost their profit margins and is particularly significant for big and multinational companies.
Conclusion
In today’s business world, there is a lot of competition. Companies need to manage their supply chain effectively if they want to get ahead of their competitors. Supply chain management is not a one-size-fits-all approach. The supply chain needs to be customized to the business and the operations of the business. In the post, we have tried to cover the following points:
