What is Supply Chain Management?
Supply chain management encompasses the regulation of all activities involved in the supply chain process. Supply chain activities range from sourcing raw materials to overseeing various supply chain logistics processes.
The ultimate objective of supply chain management is for businesses to supply their customers with high quality and high value products while maintaining a competitive advantage. The great customer service and products a business provides to its clients will likely increase both the business's success and bottom line profitability.
With an ever growing global supply chain, supply chain management is more competitive and complex than ever before. Developing and sustaining supply chain management strategies and best practices increases the likelihood of businesses not only surviving, but thriving.
The Importance of Supply Chain Management
Effective supply chain management directly correlates with a business's profitability and success. Using demand planning and supply chain analytics productively are two foundational best practices of effective supply chain management.
Customer service capabilities are heavily impacted by supply chain management proficiencies. Both customer retention rates and the overall customer experience suffer when businesses are unable to deliver the product or service a customer purchased.
Supply chain logistics are smoothed and simplified with proper supply chain management. As technological advancements continue to develop, supply chain managers can track anticipated raw material deliveries through every step of the global supply chain.
The built in confirmation processes that management software contains decreases the likelihood of incorrect orders being shipped. As a result, costs associated with returning unwanted products are completely avoided.
Both employee scheduling and inventory management are much more effective when supply chain operations are optimized. Employee scheduling based on demand planning avoids the dilemma of not having enough inventory personnel on staff to handle business needs, or overscheduling leading to wasteful labor costs.
Especially for seasonal products, demand planning avoids inventory management issues. Instead of having an overstock of products that must be sold at a highly discounted rate or not enough inventory to satisfy customer demand, effective supply chain management maximizes business profitability.
The Top 6 Components of a Supply Chain Management System
During the supply chain management process numerous activities occur simultaneously. Businesses should develop and maintain an effective supply chain management system in order to streamline and optimize their processes.
Gaining a better understanding of the top components of a supply chain management system helps businesses to prioritize and prepare for the future. Top supply chain management system components include-
Supply chain management is complicated and necessitates extensive planning. Utilizing information obtained from demand planning processes, businesses must evaluate if their supply chain will provide an effective supply for anticipated future customer demand and sales.
Metrics must be established to measure the success of supply chain management objectives. Setting realistic and measurable objectives is crucial for supply chain planning and supply chain management processes.
The global supply chain is ever-expanding and consistently changing. With so many different global supply vendors available, choosing a supplier for raw materials is a significant decision.
Many businesses choose to contract one of the supply chain leaders who have established reputations and credibility. Other companies may invest more time searching for a less well-known supplier that caters to their specific business needs.
Supply chain managers must monitor and regulate the relationship between their business and their chosen supplier. If there is ever a customer service issue, supply chain managers should contact their vendor's supply management representatives immediately.
Supply chain managers are responsible for monitoring a wide range of activities including-
- Receiving raw materials
- Product manufacturing
- Quality and assurance
- Shipping and packaging
Not only do these activities need to be performed in a timely manner, but they must meet or exceed set quality standards. Measuring production output and employee productivity are great best practices for supply chain management monitoring.
Supply chain logistics include all activities that occur from the time a customer places an order to when they receive their order. As digital supply chains become more prevalent, much of these activities are facilitated using advanced technology.
Businesses that are a part of the larger global supply chain often utilize fleets and vehicles to deliver products to customers. Many supply chain managers choose to outsource a significant portion of their delivery processes.
Best practices of customer service include providing customers with product replacements and return capabilities. While some businesses allow product returns for any reason or do not require an explanation for returns, other companies have stricter return policies in place.
Businesses must establish protocol for when items do not arrive or they arrive damaged to customers. Real time tracking capabilities for shipped products can decrease the likelihood of items not arriving to customers on time.
Replacement products may be offered for defective products, or a refund may be issued to the customer once the product is returned to a business. While defective products may be able to be remedied and resold, some inventory may have to be disposed of.
Especially for global supply chains or complex domestic supply chains, extensive collaboration and efficient communication is necessary. Effective supply chains establish outstanding communication channels as well as utilize built in compliance checks within their systems.
5 Tips to Manage the Supply Chain
A streamlined supply chain makes a significant impact on all other business operations and as a result should be considered a top business priority. 5 best practices for supply chain management include-
1. Quality Suppliers
Locating and establishing a relationship with a great supplier should be a top objective of supply chain management. Businesses should consider much more than just the rates of vendors.
For example, a supplier may appear to be a great value on a surface level but their shipments arrive late and consistently damaged. Over time, that discount supplier ends up costing a business much more money in lost sales and customer service issues.
Instead of securing the cheapest vendor available, businesses should contract a supplier that is reliable, ethical, and maintains high quality standards.
2. Employee Development
Supply chain leaders and supply chain managers should provide their staff members with regular employee development opportunities. It is not enough to train and onboard employees if a business wants to excel in their supply chain management system.
Employee development requirements may be even more extensive for businesses that work with expensive, perishable, or delicate items. Coaching, mentoring, and scenario modeling are all great best practices for continual employee development.
3. Improvement Areas
Similar to identifying and investing in employee development opportunities, the entire supply chain management system should be consistently improved. Regular monitoring and evaluations of supply chain efficiency assist with identifying possible areas of improvement.
4. Technological Advancements
Competitive businesses understand the value of investing in technological advancements. Technological advancements streamline and simplify supply chain operations while offering businesses a competitive edge.
Supply chain management software provides a wide range of benefits, from real time updates on deliveries to demand planning integration capabilities. Although management software may have a high initial investment cost, it is well worth the benefits provided for the entire supply chain management process.
5. Return Capabilities
A common mistake of supply chain managers is not focusing enough on their returns process. An outstanding returns process can develop customer loyalty and boost customer retention rates.
Considering that the majority of a business's profits are obtained through repeat customers, customer service must remain a top business priority. Management software is an invaluable tool for overseeing and maintaining customer service capabilities throughout the returns process.
5 Top Supply Chain Strategies
While global supply chain leaders have paved the way for faster and lower cost supply chains there are still significant issues that businesses must manage. Effective supply chain management necessitates development of a comprehensive strategy.
The top 5 supply chain strategies include-
Supply chain management best practices include procuring and securing vendors who are both flexible and resilient. The best suppliers will have alternative pathways established to combat unforeseen supply chain logistics issues.
Many companies undertake demand planning processes at set periods throughout the year. However, with increased technological advancements businesses are now able to execute demand planning and supply chain management processes continuously.
Effective supply chain management necessitates consistent innovation. Supply chain management professionals that are always looking for ways to boost their supply chain management processes are an invaluable company asset.
Transparent communication is the foundation of any successful business. With so many different participants involved in the global supply chain, a centralized and trustworthy communication channel can massively improve efficiency.
The same principle applies for internal business operations. Management software allows business professionals from all departments to access real time updates, avoiding costly and disastrous misunderstandings.
Contrary to popular belief, sustainability is compatible with profitability. There are a plethora of vendors available who are transparent about their sustainability initiatives.
Customers enjoy purchasing from businesses that align with their morals. Businesses can also rest assured that their raw materials are being ethically and sustainably sourced.
How to Create a Supply Chain Strategy
Developing and maintaining a supply chain strategy is immensely beneficial. While some companies choose to create their own supply chain strategy, other businesses choose to outsource the task to a third party provider.
The first step to developing an effective supply chain strategy is understanding customer needs and wants. A great supply chain strategy should be both demand driven and customer focused.
Demand planning and supply chain analytics are useful tools for learning more about specific customer demands and desires. Next, customer demands should be compared to internal capabilities.
Finding a way to bridge the gap between customer demands and internal capabilities could require extensive corrective action. Actions a business may undertake include decreasing product variations or switching from a global supply vendor to a local vendor.
Performance evaluations are useful tools for identifying if a business's human capital is optimized. Employees should be scheduled and designated tasks with careful consideration to their skill sets and abilities.
Training and onboarding programs should be updated with reference to the supply chain strategy. Development programs should necessarily incorporate supply chain strategy information as well.
A competitive analysis may identify places for a business to improve. For example, a competitor who has switched to digital supply initiatives may signal to a company that they need to update their ecommerce platforms.
To gain more insight on the competition, businesses can request information from mutual suppliers and mutual customers. If the relationship between a competitor and a business is pleasant, interviews with executives and current employees can be immensely helpful for formulating or updating supply chain management strategies.
Performing risk assessments avoids unnecessary complications and issues from disrupting business operations. Risk assessments are especially valuable when expanding operations or switching to global supply chain leaders to ensure that operations stay manageable.
Investing in and integrating technology to the supply chain management process should always be a top priority. Management software and tools can majorly simplify and streamline the entire supply chain management process.
- Supply chain management encompasses all supply chain processes from logistics management to supply chain analytics.
- Effective supply chain management should include adherence to best practices and a formulated strategy.
- A supply chain strategy should consider everything from the procurement of raw materials to an established returns protocol.
- Flexibility, continuity, innovation, transparency, and sustainability are pillars of an outstanding supply chain management process.