Supply Chain Management (SCM): A Beginner’s Guide

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Supply Chain Management (SCM): A Beginner’s Guide

The term “supply chain” refers to the whole network of people, businesses, organizations, and information that go into transforming raw materials into finished goods and services. A supply chain is made up of several production steps such as using natural resources to manufacture goods, moving and storing goods and distributing final goods to consumers.

Before every entity in a supply chain, from the supplier to the retailer, was only concerned with its own contributions and the procedures it was in charge of. For businesses that used such a limited view of the supply chain, this resulted in chaos, inefficiency, and revenue loss. Companies now recognize that each link in a supply chain depends on those that come before and after it.

What Exactly is Supply Chain Management?

It is the responsibility of supply chain management to manage the aforementioned network. It entails keeping an eye on all supply chain operations to ensure that each one operates smoothly and in unison with the others. Additionally, it entails overseeing the organizations and individuals who make up the supply chain and ensuring effective communication among them. This streamlines a company’s manufacturing process, boosts its effectiveness, and raises the end product’s worth and quality.

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Managing the Supply Chain Via Five Phases

Generally speaking, supply chain management may be divided into five phases or areas:

Plan

In order to fulfill consumer demand for products and prevent a bullwhip effect, firms develop strategic plans using supply chain analytics and materials management capabilities in ERP systems.

Source

In accordance with agreements, organizations seek and choose suppliers who can provide materials in a streamlined and effective manner. At this moment, the supply chain collaboration process starts, and it is essential for the whole supply chain management procedure.

Make

Products are made at this stage. Production scheduling, testing, ensuring compliance standards are met, packaging, storage, and release are all included. Particularly for bigger businesses, there may be many machines engaged, and they increasingly make use of IoT and AI technology to operate more effectively.

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Delivery

The logistics-related delivery stage is concerned with delivering completed items to customers using whatever means of transportation are required. More attention is being paid to doorstep delivery as a consequence of the Amazon effect, particularly as a result of COVID-19. The importance of supply chain executives collaborating more closely with customer service has increased as well. Systems for inventory management and warehouse management are particularly important at this point.

Return

All product returns, including those for damaged or unsupported goods, are included in the return stage. Additionally, this level incorporates components from earlier stages, such as inventory and transportation management.

The Importance of Supply Chain Management

Systems for effective supply chain management save costs, waste, and production cycle times. A just-in-time supply chain, where retail sales instantly transmit replenishment requests to manufacturers, has become the industry norm. Then, retail shelves may be refilled virtually as soon as something is sold. Analyzing the data from supply chain partners to see where further changes can be made is one technique to further enhance this process.

Three situations in which efficient supply chain software development adds value to the supply chain cycle by evaluating partner data:

  • Recognizing possible issues. The buyer may complain of bad service if they purchase more stuff than the manufacturer can provide. Manufacturers could be able to foresee the shortfall via data analysis before the customer is dissatisfied.
  • Dynamic pricing optimization Products that are in season have a short shelf life. These goods are often discarded or sold at steep discounts towards the end of the season. Prices are frequently constantly adjusted to suit the demand for perishable “products” by airlines, hotels, and other businesses.
  • Enhancing the distribution of merchandise that is “available to promise.” Utilizing analytical software tools, it is possible to dynamically plan tasks and distribute resources based on the sales estimate, actual orders, and promised raw material deliveries.

Bottom Line

Management of the companies and individual processes within a supply chain is referred to as supply chain management. Although it may seem that employing a supply chain alone is sufficient, supply chain management is what makes it structured and effective. It reduces the likelihood of inventory shortages, lowers production and purchase costs, and enhances customer service.

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