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Topic guide
Supply chain management: Understanding its processes

Supply chain management: Understanding its processes

Author NameBy Inioluwa Ademuwagun
•
November 12th, 2024
• 15 min read
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Table of contents

  • What is supply chain management?
  • What are supply chain business processes?
  • Strategic elements of supply chain management
  • Types of supply chain modules
  • Why is supply chain management & planning important?
  • Best practices for supply chain management system
  • Ready to do more with your supply chain management?
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Summary

Supply chain management will help you track every operation around your goods and services, ensuring efficiency in the workplace.

In recent years, the global supply chain has faced significant challenges due to factors like the COVID-19 pandemic, geopolitical shifts, and conflicts in Ukraine and Israel. These disruptions have led to slowdowns, increased costs, and logistical hurdles, altering traditional supply chain operations and supplier dynamics. Despite ongoing discussions about future strategies, the necessity to maintain the supply chain and deliver goods to consumers remains paramount.

On-demand manufacturing is proving vital for serving local markets, while digital automation technologies are paving the way for innovative solutions. Cloud-based platforms empower supply chain teams to collaborate remotely, and advancements in artificial intelligence are enhancing the efficiency and optimization of digital processes.

Amidst these challenges, how can companies do an effective work with supply chain management?

Supply chain management is a critical component of any successful business, ensuring that products move efficiently from production to the end consumer. In this guide, you’ll explore strategies to optimize logistics, manage inventory, and build strong supplier relationships.

Effective supply chain management can reduce costs, enhance operational efficiency, and improve customer satisfaction. By understanding the intricacies of supply chain processes, you can identify areas for improvement and implement best practices that align with your business goals. This guide provides comprehensive insights into managing a supply chain effectively, helping you navigate challenges and capitalize on opportunities for growth.

What is supply chain management?

Supply Chain Management (SCM) is the proper management of goods and services from its raw material stage to their delivery as a final product. It represents the contribution made by managers, business owners, and employees to streamline the development and supply of a product to customers. The concept of product supply and a network of suppliers, manufacturers, and producers has been around for a long time, but the term “supply chain management” wasn’t coined until the 1980s. Since then, SCM has driven the notion of efficient and effective product development and supply.

When manufacturers, production companies, or business enterprises start to create or produce goods and services, the most important thing is ensuring the final product supply is seamless, efficient, and safe. SCM therefore aims toward customer satisfaction as it embodies the logistics process of products and how to manage the supply of products in a bad economy in the post-pandemic era.

An excellent supply chain management means that every process, step, and procedure involved in the delivery of goods and services have gone through proper audit and evaluation, ensuring it is cost-efficient, safe, and seamless. A good supply chain manager will ensure that they erase any loopholes that can affect the smooth supply or delivery of products to customers.

SCM is a systematic concept; it has various components or features that support its success. From raw material procurement to final product and maximization of customer value, the supply chain aims to simplify all processes that allow a company’s supply chain to run efficiently.

The SCM practice focuses primarily on the successful management of operations, procurement, system and industrial engineering logistics, and also helps to improve the technology involved in marketing. SCM also strives for an integrated course of actions that takes discipline and total quality control in business.

Most organizations or companies today rely on SCM to stay competitive in the global market and networked economy. Competitive businesses now strive to achieve excellent product planning, demand planning, supply planning, sales and operations planning, and supply management.

What are supply chain business processes?

SCM only becomes successful through the proper integration of necessary activities into the supply chain process. This helps streamline the entire management system by laying out an order of operational instructions to safely and efficiently manage the supply of goods to customers. 31. To accommodate remote-working practices, 58% of companies are implementing new human resources policies and 61% are working on establishing better IT capabilities such as cloud-based systems for remote collaboration, according to supply chain research.

  • Customer service management process: This boils down to the relationship between organizations and patrons, as good customer service is the source of customer retention, so most successful organizations try to build a relationship where their clients keep a good rapport and provide real-time information that keeps people interested in continued patronizing.
  • Inventory management: This entails properly managing the timing and quantity of orders and stocked goods by an organization to always satisfy demand in a cost-effective manner. In simpler words, it is the management of supplying the right goods in the right proportion, in the right location, at the right time, and at the right cost.
  • Production development: The standard key to product development is understanding customer needs through proper customer service management, choosing the appropriate materials and suppliers to meet up with the procurement requirements, and upgrading the production technology and manufacturing flow to better develop products that will attract customers.
  • Procurement process: This refers to the management of the entire product production process and the seamless manufacturing activity flow. Manufacturers obtain the necessary material to produce and develop products that are in line with customers’ requirements. Properly managing this process is important to ensure that both parties (companies and customers) benefit equally.
  • Manufacturing flow: An organization whose line of operation relies on manufacturing goods should be able to manage the flow of production activities and processes adequately. The manufacturing flow of a company must be flexible and adapt to changes in customers’ preferences, economic goals, and organizational standards.
  • Physical distribution: This concerns the physical transportation of goods and services to customers. Physical distribution fosters relationships between marketing or supply channels and customers, like linking wholesalers, retailers, and manufacturers.
  • Outsourcing/Partnerships: Manufacturing materials and equipment are not the only things companies outsource. Other sectors that can deliver in-house activities, like logistics, can also be outsourced or partnered with to strengthen the effectiveness of supply-chain in manufacturing and delivery.
  • Performance measurement: As a quality manager, evaluating the performance of each process in manufacturing and supply is imperative for growth and the improvement of the supply chain and product activity. Highlighted setbacks in the performance of any procedure reveal a chance for development, which further maintains competitiveness.
  • Warehousing management: This involves proper management of the storage of goods (raw material, parts, finished products, equipment, etc.) for the sake of improving marketing and supply inventory, downsizing workforce costs, and ensuring on-schedule delivery.
  • Workflow management: This aims to introduce an atmosphere of utmost devotion to organizational and customer requirements that will increase supply-chain efficiency and effectiveness. The existence of a proper workflow in an organization is needed to complete business systems seamlessly, including supply chain management.

    Strategic elements of supply chain management

    To ensure that the supply chain is effective, managers try to implement strategies to cut costs and minimize shortages. These strategies are supply chain management components that promote productivity and efficiency in the entire cycle of product creation, development, and delivery. These five-part strategies are:

    • Planning: Planning, as we know, is a necessary stage for all processes or projects. In the process of supply chain management, planning involves coming together as an organization to evaluate the requirements for the company to meet customer expectations and their future goals. Because of this, organizations consider the competency of the current staff, the capacity and limitations of each piece of equipment and machinery, and the raw materials needed in each manufacturing stage. If any of these do not meet the required standard intended to favor organizational goals and customer needs, managers will try to compromise for that by planning.
    • Sourcing: Sourcing involves collaborating with external partners to supply the raw materials needed for each stage of manufacturing. Your supplier, who also acts as your vendor, must meet specific requirements based on the type of goods they deliver. When outsourcing suppliers, it’s beneficial to request a record of their most recent successful deliveries. Ensure this record demonstrates their ability to deliver raw materials, equipment, and finished products on time and with high quality.
    • Manufacturing: The manufacturing process of a product is the heart of SCM; a product’s manufacturing process determines the supply chain’s workflow. Without a final product or goods to be transported to a customer’s location, there will be no supply chain in the first place. The processes involved in the manufacturing process are assembly, testing, inspection, and packaging.
    • Distribution: After a product goes through the final stage of manufacturing, if it’s not mandated for assessment, evaluation, and review, the next step usually involves packaging it and sending it out to customers. Large organizations ensure that their delivery personnel, channel, and routes are in the right condition for on-time delivery of goods in perfect quality. For utmost efficiency and effectiveness, backup delivery components like extra routes, channels, and staff are ready for deployment should anything jeopardize the functionality of the previous components. In line with backup delivery components, it would also be beneficial to have an alternative distribution method if one fails to yield a positive result.
    • Reverse logistics: Reverse logistics, also termed “Returning,” involves customer and product returns. Say a customer develops a reason to return a good; it is the responsibility of the organization or company to handle the interaction successfully, especially if the reason is the company’s fault. An organization must be capable of accommodating customer returns and assigning refunds for returns received. To avoid future returns, organizations should strive to use a product return scenario to highlight the possible defects on a returned product and identify non-conforming goods and expired products.

    Types of supply chain modules

    The implementation of a supply chain management system differs per company as each possesses different goals, strengths, features, and weaknesses; hence different approaches are used to implement supply chain management properly. The type of company involved will determine what the supply chain management process will look like. Because of this, six different types of SCM models are available for a business or organization to implement. They are as follows:

    • Continuous flow model: If your business relies on producing a consistent product line with steady demand, the continuous flow model is ideal for you. This approach is perfect for industries where the demand for essentials like food, clothing, or transportation remains constant. By maintaining a continuous production cycle, you can ensure a reliable supply to your loyal customer base, minimizing disruptions and maximizing efficiency.
    • Agile model: For those of you who thrive on adaptability, the agile model offers the flexibility you need. This model is well-suited for businesses facing fluctuating demand and needing to respond quickly to market changes. By embracing agility, you can tweak your manufacturing and supply processes as needed, allowing you to meet specific customer requirements and stay ahead of unpredictable market trends.
    • Fast model: If your company focuses on capitalizing on the latest trends, the fast model is your best bet. This approach is tailored for businesses that need to quickly bring trending products to market. Whether it’s seasonal items or products driven by current events, the fast model ensures you can deliver swiftly, capturing consumer interest and maximizing sales during peak periods.
    • Flexible model: When your business is affected by seasonal demand, the flexible model is essential. For example, if you sell holiday-specific products like Christmas trees, you know demand surges during certain times of the year. The flexible model allows you to ramp up your supply chain operations in anticipation of these demand spikes, ensuring timely and efficient delivery when it matters most.
    • Efficient model: If efficiency and quality are your top priorities, consider the efficient model. This approach emphasizes tight profit margins and stringent control over inventory, logistics, and processing. By focusing on efficiency, you can reduce waste, lower costs, and maintain high-quality standards, ensuring your supply chain operates at peak performance.
    • Custom model: For businesses that require a tailored approach, the custom model offers the flexibility to design a supply chain that meets your unique needs. Whether you have specific technical requirements or cater to niche markets, this model allows you to structure your processes to align perfectly with your business objectives, providing a seamless and personalized customer experience.

    Why is supply chain management & planning important?

    SCM and planning is essential because, without an effective and efficient supply chain, the reason for producing and manufacturing goods to sell to customers cannot be fulfilled. SCM is integral to major international companies and businesses with wide-scale operations. It helps maintain good consumer brand identity, good customer relationships, good inventory management and control, and successful business transactions. Supply chain planning can help a company meet stated annual goals and keep up with other organizations in terms of efficiency and delivery. SCM proves helpful in organizations making the following objectives achievable:

    • Improvement of all-around efficiency: An excellent supply chain management system is crucial for achieving cost-efficient manufacturing and supply processes. By implementing effective SCM practices, you can reduce overall expenditures, minimize labor costs, and decrease operational disruptions. This efficiency allows you to allocate resources more effectively, streamline operations, and ultimately enhance your bottom line. A well-managed supply chain also helps you anticipate and respond to market changes swiftly, keeping your business agile and competitive.
    • Enhancement of productivity: SCM plays a vital role in boosting the productivity of goods and services within your company. By establishing a robust supply chain plan, you can ensure that resources are utilized optimally, leading to increased output and efficiency. This structured approach not only enhances your ability to meet customer demands but also leads to improved customer satisfaction and loyalty. As a result, you experience a positive cycle of increased demand and productivity, driving growth and success.
    • Optimization of transportation and logistics: Proper adherence to supply chain practices streamlines and optimizes the distribution processes, particularly in transportation and logistics. By planning and coordinating logistics effectively, you can reduce delivery times, lower transportation costs, and improve the reliability of your supply chain. This optimization ensures that goods reach customers promptly and in excellent condition, enhancing your reputation and customer trust.
    • Customer satisfaction: Effective supply chain management is essential for building strong business-to-customer relationships. By ensuring timely and quality delivery of products, you can significantly enhance customer satisfaction. Customers appreciate reliable service, knowing they can count on your company to meet their needs consistently. Additionally, SCM practices enable you to monitor customer feedback and satisfaction levels, allowing you to make informed improvements that further boost client happiness and loyalty. This proactive approach not only retains existing customers but also attracts new ones, contributing to long-term business success.

    Best practices for supply chain management system

    Building and maintaining strong supplier relationships is crucial for a successful supply chain. Regular communication and collaboration with suppliers ensure that both parties understand expectations and can work together to address challenges. Establishing trust and transparency can lead to better pricing, improved quality of materials, and more reliable delivery schedules, which are essential for smooth operations.

    Leveraging technology is another key component of an efficient supply chain. By utilizing advanced software solutions like inventory management systems, demand forecasting tools, and transportation management systems, you can streamline operations and reduce errors. These technologies provide real-time insights that enable data-driven decision-making, optimize resource allocation, and enhance overall supply chain performance.

    Accurate demand forecasting is essential for aligning supply chain activities with market needs. By analyzing historical data and market trends, you can predict future demand more accurately, reducing the risk of overproduction or stockouts. Effective demand forecasting helps maintain optimal inventory levels, improve customer satisfaction, and minimize waste, ensuring that your supply chain operates efficiently.

    Ensuring visibility across all stages of the supply chain is vital for identifying potential issues early and taking corrective action. By tracking the movement of goods and monitoring key performance indicators, you can gain insights into the efficiency and effectiveness of your supply chain. Enhanced visibility allows for quick responses to disruptions, maintaining smooth operations and ensuring that customer needs are met consistently.

    Focusing on continuous improvement is crucial for a successful supply chain management system. Regularly assessing processes, identifying areas for enhancement, and implementing changes to optimize performance are key to staying competitive. Encouraging a culture of continuous improvement within your organization ensures adaptability to changing market conditions and fosters long-term success.

    Finally, prioritizing sustainability in your supply chain management can lead to long-term benefits for both your business and the environment. Implementing eco-friendly practices such as reducing energy consumption, optimizing transportation routes, and using sustainable packaging can minimize your carbon footprint. These efforts not only enhance your brand reputation but also appeal to environmentally conscious consumers, contributing to overall business success.

    Ready to do more with your supply chain management?

    Effective supply chain management is essential for ensuring seamless operations, reducing costs, and enhancing customer satisfaction. By implementing best practices and understanding its processes you can use it to build strong supplier relationships, while leveraging technology, and focusing on continuous improvement. Prioritizing sustainability and maintaining visibility across all stages further strengthens your supply chain, positioning your business for long-term success.

    To streamline your supply chain processes and achieve operational excellence, consider using Lumiform. Our platform offers powerful tools to enhance efficiency and ensure compliance across your supply chain operations. Start your free trial with Lumiform today and transform the way you manage your supply chain.

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    Author
    Inioluwa Ademuwagun
    Inioluwa is a freelance content writer with a passion for words and everything marketing. She has worked closely with B2B SaaS and e-commerce brands creating product-led content. She loves to read fiction and would describe herself as an introverted nerd who desires to travel around the world. She currently doing that with her words till she can with her eyes
    Lumiform offers innovative software to streamline frontline workflows. With over 12,000 ready-to-use templates or custom digital forms, organizations can increase efficiency and automate key business processes. The platform is particularly user-friendly, offering advanced reporting capabilities and powerful logic functions that enable automated solutions for standardized workflows. Discover the transformative potential of Lumiform to optimize your frontline workflows. Learn more about the product

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