Supply chain management is the process of organizing and overseeing supply chain activities with the goal of achieving a competitive advantage. The core of any company’s operations, supply chain management involves everything from the acquisition of raw materials through to delivery of the end product. In this article, we will discuss how supply chain management works, its importance, its challenges, and best practices for a more effective and robust supply chain management process.
The Importance of Supply Chain Management
If you take a closer look around your house or workplace, you will notice that nothing has arrived at your doorstep without supply chain management (SCM). Millions of employment opportunities around the world are directly linked to this process. From affordable consumer goods to complex industry-related equipment and necessary resources, everything comes through a supply chain process. However, even though the SCM process is at the core of the global economy, many businesses are still operating their supply chains with the same conventional methods and machines they’ve been using for decades.
Supply chain optimization is essential because it can help accomplish various business objectives. For example, improving the manufacturing process can enhance the quality of the product, lowering the risk of product returns and damages while helping to build a strong consumer brand. At the same time, keeping control over shipping activities can improve customer experience by avoiding expensive shortages or periods of inventory overstocking. Overall, supply chain management provides numerous opportunities for businesses to enhance their profit margin, and it is crucial for companies with large and international operations.
A smooth operation means an effective supply chain management process, one that’s well-connected and revolves around communication along the chain. When supply chains meet or exceed the expectations of the customer, it’s because of a constantly improving process. The overall business benefits from high order rates, low cost-to-serve, and positive customer sentiment.
Supply Chain Management Process
Supply chain optimization revolves around three main elements: demand management, sales and operations, and supply management.
- Demand Management
Demand planning is the process of predicting customer demand so that when the requirements of that product are placed, It is available in your inventory. Sometimes, business owners maintain inventory for their brick-and-mortar shop, but the customer orders that product from an online channel. This means the product is available but cannot be sold. That’s why your business needs demand planning software to optimize customer demand and inventory planning to avoid overstocking or understocking.
- Sales and Operations Planning
Sales and operations planning (S&OP) is an integrated business management process that allows leadership to zero in on crucial supply chain drivers, including demand management, sales, production, inventory management, and new product introduction. Keeping business and financial impact in mind, the idea behind S&OP is to enable the executive to make better decisions through dynamic strategies and better-connected plans across the enterprise. Sales and operations planning software helps in effective supply chain management and targets the resources of the company to deliver what the customer wants.
- Supply Management
The supply management process refers to the act of identifying, acquiring, and managing resources and supplies that are important to the operations of a business. Also recognized as procurement, supply management includes the purchasing of goods, services, information, and any other necessary resources that empower a company to handle operating and growth processes.
The goals of supply management are cost control, the efficient allocation of resources, effective gathering of information, and risk management to be used in business decision-making processes.
Supply Chain Management Best Practices
To be able to succeed in this competitive market, you need a supply chain that is connected from start to end. Let us discuss a few best practices for supply chains.
- Shift Towards Real-Time Supply Chain Management
When using spreadsheets and ERP systems for planning, companies rely on historical data. This process can help you at some point, but when it comes to optimum accuracy, real-time demand forecasting software is the way to go. With just the right real-time connected supply chain management software, you can convert your “what if” scenario into “what next” and plan more effectively so you are ready ahead of time.
- Unify Supply Chain Planning with Business Planning
One critical step of SCM is unifying supply chain planning to sales and operations, as well as to financial planning. Companies can benefit from this synchronization at a broader scale. This unification can help businesses efficiently organize and manage their inventory forecasting for short-term planning, as well as long-term planning. Deploying real-time supply chain solutions that enable more comprehensive collaboration means that key entities can create new scenarios and immediately assess how to use their resources when tough times strike.
- Consider the Demand of the End Consumer
Anticipating what the consumer wants and when they want it is an ever-growing challenge. A solution like end-to-end visibility across the supply chain can sense demand signals from customers. This way, changing customer reactions towards your products can be quickly identified, and changes to the demand for the outcome can be assessed. The company and customers can both benefit from this accurate optimization.
- Safeguard the Flexibility to Cope with Constant Changes
When technology facilitates quick error detection in trends and efficient planning, constant changes won’t affect your supply chain, resulting in time and money saved and increased profitability.
The Benefits of Supply Chain Management
Lots of businesses would simply just stop functioning properly without proper supply chain management, so that makes a sizable impact right there. The question for companies is whether to stick with the systems they’ve used for years and grown comfortable with, or make the jump to new, fast-paced technology that is unfamiliar to them. While comfort has its benefits, when it comes to the supply chain, relying on spreadsheets isn’t going to have you leading the pack. Let’s have a closer look at some of the benefits of supply chain planning:
- Increased Productivity
Demand forecasting software and its predictive measures help you and your business run more efficiently. This can avoid bottleneck incidents, improve workflow, and enhance productivity. The use of responsive data analysis and automated processes also means faster shipping and delivery times.
- Reduced Supply Chain Costs
The use of inventory planning software helps eliminate costly guesswork, which reduces wasteful stockpiles and risky shortages. Demand planning software lets existing assets become more responsive and deliver the most efficient and helpful workflow possible for every scenario. This tool also provides more accurate forecasting to help minimize half-full delivery trucking, uncoordinated routes, and inefficient shipping management.
- Greater Supply Chain Agility
Market trends and market shifts can happen suddenly. Resilient supply chain management processes have the capacity to adapt to any situation. Real-time data and actionable insights can help supply chain managers reallocate company resources into better workflows.
- Better Customer Service
The ideal SCM practices are customer-oriented and tailor-made to be responsive and adaptive. With the competition only a click away, state-of-the-art SCM enables companies to implement customer feedback and trends. This feature allows companies to observe how customers are responding to their products and how they are satisfied with the overall customer experience.
- Exceptional Transparency and Sustainability
The supply chain management process provides complete transparency from the manufacturing stage to last mile logistics, delivery, and returns. With the ability to see all the inputs and outputs throughout the chain, organizations can greatly reduce their overall wastage in the warehouse and during transit as well.
What Skills Are Needed for Supply Chain Management?
To pave the way into a revolutionized and transformative future, you need to fuse technical and business knowledge with collaboration and communication throughout your supply chain. The capacity to influence leaders who work with the supply chain is the key, as well as the skills to interact with department leaders, which is essential because the supply chain process often reaches across business units.
To compete and grow in today’s market, modern supply chain planning software must be able to collect and interpret all the data captured and generated across the entire supply chain. Modern technologies are required to completely leverage this data – turning it into real-time actionable insights and using it to automate supply chain management processes and workflows in an agile and smart way.
While we cannot completely predict the future, we can most certainly be prepared for economic shifts, rapidly evolving customer demand, and unexpected events. With the use of business data and technologically powered supply chain planning, you can transform supply chain management and build a responsive and accurate supply chain to take your business to new heights and beyond.
The effective supply chain leader of tomorrow is tech-savvy and adaptable, working side by side with a world full of machines