What is Supply Chain Management?

Supply chain management refers to managing supply chain processes to increase customer value and gain a competitive edge. Supply chain management includes a range of activities such as logistics, production, product development, and sourcing supplies. SCM involves all of the systems which are used to organise these various activities.

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SCM focuses on the idea that products reach users due to the input of multiple parties. It’s important to manage activities across the entire chain, as opposed to just focusing on in-house processes. The different organisations in the supply chain are connected together by both informational flows and physical flows.

Informational flows help supply chain members to manage the flow of materials and goods. Informational flows also support businesses to make long-term roadmaps for success. Physical flows refer to direct movement, transformation and storage.

How does supply chain management work?

Supply chain management involves the logistics of five different areas:

1 . The strategy: firstly, businesses must determine the product or service strategy. For instance, will the business purchase from a supplier, or manufacture the product themselves? If a business decides to manufacture the product, they should determine whether the product will be ‘made to order’ or ‘made to stock’. As part of the planning stages, businesses should consider the global supply chain and seek to improve performance.

2. Supply source: next up, businesses have to organise suppliers to source their products or services. Before you can source materials or services, the suppliers should be subjected to a vetting process. To find suppliers of the best quality, it’s helpful to access a Supplier Information Management Database. A SIM database providers buyers with a clear view of supplier information. Each supplier has submitted a detailed questionnaire, often including details on auditing and compliance. SIM systems can help buyers to vet suppliers, and find those that meet their requirements.

3: Manufacturing aspects: the manufacturing stage involves scheduling activities, product testing and packaging. At this stage of the process, businesses should be using lean manufacturing to boost productivity and eliminate waste. During the manufacturing stage, waste can occur due to misuse of materials or misuse of employee time.

4: Logistics and delivery: stage four involves activities such as deciding on distribution methods; completing customer orders; and choosing transport options. Delivery stages cover warranty periods, and businesses should also manage export and import processes.

5. Managing returns: managing returns involves determining the condition of products, authorising the returns, offering refunds, or providing replacements. In the case of services, this step may involve resolving complaints or bad feedback.

Why is successful supply chain management vital to businesses?

Effective supply chain management is vital to develop a good reputation with your buyers. During the SCM planning stage, you should determine what your customer requires and adhere to these needs. SCM management helps companies to meet compliance regulations and reduce the waste of resources.

Depending on your industry, supply chain management may bring about various challenges. According to Research Gate, ‘The main challenge facing the oil industry is putting reserves into production, and delivering final products to consumers at the minimum cost possible.’ To overcome this challenge, improving SCM should be top of the agenda for oil companies. In the oil industry, it’s common for transportation times to vary, which can compromise service levels. Improved transportation scheduling could help to reduce costs and improve services.

Utilities companies, including energy providers, are consistently reevaluating their supply chains. Reevaluation helps companies to save money and beat the competition. One of the key challenges facing energy supply chains is consistency. Compliance with the HSSE is mandatory, and many organisations want HSSE policies reflected across all of their procedures. Due to this, a consistent and effective service from all suppliers is more important than ever.

How to improve supply chain management?

Supply chain management is concerned with offering more value than your competitors. To achieve this, you have to determine the value of your clients and establish and improve relationships with your suppliers. You should also focus on managing your costs and assess your performance.

Lastly, environmental sustainability is a key priority for modern supply chains. Evaluating your supply chain for sustainability should be an ongoing process. Eco-friendly business practices can help companies to boost their credibility and secure new contracts, as well as protect the environment. We’re also seeing a growing number of companies seeking to build more ethical supply chains. When companies come under fire for unethical labour practices, this severely damages their reputation and affects their profitability.

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