Learn how to manage the supply chain
Supply chain management helps companies streamline their operations and keep pace with competitors. For modern businesses, it is now an important part of providing quality products at competitive prices.
Today, supply chain management is a major taught in universities and business schools. Large companies can have entire departments responsible for managing and optimizing their supply chain.
However, SMEs usually have less experience and resources to improve their supply chain performance, so this article is intended to serve as an aid to companies looking to learn more about supply chain management - and take advantage of some of the supply chain management tools and techniques that Easily accessible and now available.
What is supply chain management?
Supply chain management is the way companies and interconnected systems manage the flow of goods and services, from raw materials to the end user.
The supply chain can include many different companies; Supply chain management is how each company manages its internal performance, as well as the flow of materials to and from other companies.
SCM touches on a range of activities that include purchasing, inventory management, product life cycle management, transportation management, order management, and more.
A supply chain manager may improve performance by:
Managing and implementing Service Level Agreements with suppliers
Product management to allow more cost-effective purchasing
Inventory management to reduce waste and warehouse costs
Establish cost-effective transport policies and contracts and much more.
Before we get into the specifics, it's worth looking at how some of the most popular supply chain management frameworks break this practice down into business areas.
The Five Elements of Supply Chain Management
There are many different frameworks for supply chain management. For the purposes of strategic decision-making, the best model is the Supply Chain Operations Reference Model. This framework focuses on five areas of the supply chain: planning, sourcing, execution, delivery and return.
The planning stage defines the supply chain strategy, while the other four elements are the prerequisites for its implementation.
Companies must be skilled in all five areas in order to be effective and avoid bottlenecks.
It's worth noting here that in this article, we'll largely look at how companies can improve the first two areas - the supply side of the product life cycle, for manufacturers, that means focusing on pre-production, while wholesalers and distributors focus on operations before warehousing.
Of course this is a thing of perspective: in the middle of the supply chain, any company will simultaneously be a supplier to other companies, while also having its own suppliers.
That is, the supply-side performance of one firm is a delivery objective of another firm.
Reasons why supply chain management is important to business
1- It reduces operating costs
Effective supply chain management identifies costly processes that do not contribute to the value of the end product. This allows businesses to reduce or eliminate these processes, lowering operating costs.
Lower production costs
Manufacturers rely on efficient supply chains to get raw materials to assembly plants at the best possible price, and in a timely manner to avoid shortages that slow or halt production.
Lower acquisition costs
Retailers, distributors, and wholesalers rely on supply chains to deliver products quickly to reduce the cost of holding inventory in their warehouses.
This is especially true for products with a short shelf life, such as fresh foods, or products that quickly become out of date, such as laptops or cell phones.
2. Improves efficiency
Waste - whether it's wasted time, effort or raw materials - is the bane of operational efficiency, a good supply chain management strategy takes into account and reduces waste by focusing on value-adding activities.
3. Increase profits
Strong and efficient supply chains tend to generate more revenue and increase profits. Lower costs allow for more competitive prices, a higher profit margin, and allow activities such as marketing.
4. It improves product and material flow
The less time it takes for products to reach the end user, the more efficient the product flow. Efficient product flows experience less lag between demand and supply - making accurate forecasting easier - and whip effects are less obvious.
5. Improves information flow
An effective supply chain allows information to be shared along the entire supply chain. This removes bottlenecks and gives companies a view of the entire supply chain so they can make informed decisions.
In addition, real-time information keeps all players responsive so they can act quickly with changes.
6. Enhances customer satisfaction
Happy customers have what they want, when they want it - at the best price, an improved supply chain can enhance customer satisfaction and loyalty, and encourage more sales in the future. Supply chain transparency is becoming increasingly important to consumers.
Multiple tasks
Supply chain management is a complex task, large companies can dedicate an entire team working to improve their supply chain - but what should small and growing companies do?
Business managers in small and medium businesses often have to multitask and incorporate supply chain management into their roles by managing supplier and buyer relationships themselves.
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