Supply Chain Definition
Supply chain management is termed as managing the flow of products and services that starts from origin and finishes with the product’s consumption by the customer. It further includes the movement/transport and storage of goods like raw materials, work in progress and full furnished goods.
What is Supply Chain Management?
- Management of the Supply chain mainly combines demand and supply networks. It focuses on the efficient working of every step involved in the entire supply chain meaning using various approaches and strategies.
- Every link in the chain tries to minimize the cost and improve long-run performance by eradicating useless expenses, handling and movements.
- Supply chain management are to relate and monitor the distribution, production and transport of goods and services. Therefore, this can be followed by keeping a good hold on inventories, shipments, internal sales and productions.
- Also, this must be noted that supply chain management and supply chain event management are different, which talks about factors that interrupt an effective supply chain.
- Supply chain meaning further includes three types of flow in the supply chain management :
- Material flow
- Information flow
- Money flow
6. After discussing the types of flow, next comes the components or elements that complete this flow.
- Transportation
- Long-term Decisions
- Lane Operation Decisions
- Choice and Mode of Carrier
- Dock Level Operations
- Warehousing
- Sourcing and procurement
- Returns management
- Post-sales services
Advantages of supply chain management
When the target becomes customer satisfaction then the supply chain management of the company plays a vital role. Firms are dependent on supply chain networks significantly.
Now, let’s understand the benefits provided by the supply chain which are explained as follows:
- Firstly, it improves business and productivity functions.
- Secondly, it increases inventory management keeping a healthy execution of stock in just-in-time.
- Manages better mechanism of delivery for services and products with minimized delay.
- Creates improvised customer relations and service.
- Minimizes indirect, direct, transportation and warehouse costs.
- Assist firms in coping with challenges regarding economic upheaval, globalization, related differences and expanding consumer expectations.
- Helps to achieve the target of distributing products to the right place in time.
Supply chain management forms a part of distribution and logistics while the actual work starts with product mix in marketing discussed in the topic product hierarchy example.
Objectives of Supply Chain Management
Looking for sources of cost and revenue
For marketing, there is only one source of revenue i.e. consumers and customers. Proper management in the flow of products, services, information or funds needs to be implemented for a successful supply chain.
Maximize the value generated
Supply chain profitability refers to the difference between the cost paid by the customers and expenses incurred by the firm to supply that product. As a result, the higher the supply chain, the higher will be the value generated or the success of the organisation.
Improvement of cost quality
It is cost quality. Increased productivity, in turn, gives optimization of resources and balance.
Products being replenished whenever required
Replenishment is termed as restoration of supply or stock to a former level. Therefore, a marketer can easily replenish the material whenever required.
Speedy delivery
With an adequate supply chain, a distributor can provide products to the customer with greater speed.
Shortens the time to order
There are reduction in time which is required for fulfilling and ordering the demand of the customer.
Efficiency
Appropriate supply chain management helps to enhance the efficiency of supply chain network points.
Delivery optimization
Target customers’ demand gets delivered in time with low cost and high quality.
More-Awareness
Being involved in supply chain management, the marketer gets aid to be updated with the supply chain efficiency and dynamics.
Class performance
The management between chains helps to maintain coordination and results in the world-class performance of the organisation.
Inventory optimization
The proper utilization or the optimization of post and pre-production inventory levels. ( Inventory is termed as outflow and inflow of the stock for production)
Demand fulfilment
Also, it becomes difficult for the organisation to balance supply and demand. However, the objectives of supply chain management signify fulfilling the demand of customers through valuable resources.
Flexibility
Managing the supply chain network results in improvised control mechanisms and flexible planning.
Business Characteristics
Flow or the movement of the goods helps the companies to understand the macro and micro levels of the supply chain which in turn provides a better understanding of business characteristics.
Efficacy
There is a relation between efficiency and efficacy. SCM provides greater labour, space and equipment efficiency.
Cost reduction
Supply chain management further reduces the company costs like fixed assets, manufacturing, transportation, inventories etc. Moreover, system-wide cost and service level (response time) also decrease.
Better decision
The objectives of supply chain management moreover enable the top and middle-level managers to make apt decisions. Similarly, this can also be used as a stability strategy in strategic management as a competitive advantage.
Better distribution
When the intermediaries are used properly, then the objectives of supply chain management are achieved. This results in a regular distribution of goods by utilizing all resources.
Why SCM is important?
In today’s scenario, manufacturers and retailers are closely related to moving to the circle for the replenishment of orders. As a result, they remain tuned for just-in-time stock to restore their shelves.
Moreover, since the relationship has widened, information from the supply chain gave an advantage to companies with an analytic tool for better results. A few points are as follows:
Dynamically optimizing the price
Items that are seasonal or perishable are difficult to manage for which a supply chain strategy is important. Seasonal products like clothing need to be cleared during that duration or are sold at discounts to wind up the stock. Moreover, hotels or airlines with perishable and limited products have to behave dynamically that improve margins.
Figuring out problems before in time
In case the manufacturer faces a shortage of product as demanded by the customer, then in traditional methods, he might return unsatisfied. However, one can cope with the needs of the buyer. This can either be done by restoration or by offering a substitute to make the customer happy.
Promising inventory
A marketer allocates the resources to fulfil the forecasted sales and actual and promised orders. As a result, it focuses on confirming the delivery date which in turn reduces incorrectly filled orders.
Supply Chain Management Process
It is followed to make the supply chain network cost-effective and efficient. As a result, it includes steps involved in manipulating raw materials into the final good. Following are the five basic components of the supply chain management process:
Plan
Firstly, the supply chain management process starts with planning level. The company need to build a strategy to know how the services and products will fulfil the demands of the customers. The planning mainly focuses on the maximization of profit. A set of metrics is planned for designing the products and managing the services by the company.
Develop
Secondly, the next step includes sourcing or developing. This step includes developing a relationship with suppliers for the production of the raw material. It counts not only finding trusted suppliers but also identifying various methods for delivery, shipping and payment.
In this stage also create a matrix for improving and controlling relations. The final thing includes authorizing specific supplier payments.
Make
Thirdly, it is based on the production of products that are required by the customers. This stage involves designing, producing, testing, packaging and synchronization of the products.
The major duty of the manager is scheduling activities for the preparation of the delivery. This level is considered the most intensive unit where each firm differentiates based on production output, quality levels and workers’ results.
Delivery
Fourthly, there comes a delivery stage. Therefore, the final products are delivered to customers. This stage is mainly termed as logistics phase where customers’ orders and the planning of goods take place. Companies collaborate on the receipt of orders, frame warehouses, pick carriers, and arrange an invoice system for payments.
Return
Finally, for objective of the supply management process is the return. Here the defective items get returned by the customer to the supplier. Therefore, customer queries and grievances are handled which results in a problematic section. The supply chain network must set a flexible section for handling the returns who have issues.
Inventory Management
There can be instances where the efficiency of inventories measures the efficiency of the supply chain. Briefly, it states that the supply chain maintains the efficiency of inventory reductions. Although inventory is considered as a liability, supply chain managers ensure that they are stored in the need for inventory. However, the unwritten law stays to keep inventory at a minimum level.
Moreover, inventory management is termed as a task since the managers keep inventories as low as possible(because of inventory investment). Furthermore, this is followed since the cost of holding the inventories can be high. This amount includes costs related to purchasing, acquiring and managing the inventory. As a result, inventory management becomes of utmost importance.
Frequently Asked Questions
What is the concept of supply chain management?
Supply chain management is termed as managing the flow of products and services that starts from origin and finishes with the product’s consumption by the customer. It further includes the movement/transport and storage of goods like raw materials, work in progress and full furnished goods.
What are the 5 basic steps of supply chain management?
Following are the five basic components of the supply chain management process:
- Plan
- Develop
- Make
- Delivery
- Return
What is the role of the SCM?
SCM attempts to centrally control or link the production, shipment, and distribution of a product. By managing the supply chain, companies can cut excess costs and needless steps and deliver products to the consumer faster