Supply Chain Management Process
If you’ve ever wondered “Why is supply chain management important?” there are actually quite a few reasons. Effective supply chain management processes can improve the production cycle by reducing costs, wastage, and time spent on manufacturing and delivering products.
Supply chain management (SCM) has an incredibly important role in business operations. The industry ensures that goods and services are delivered to businesses in a timely, efficient, and cost-effective way.
This means that every product you’ve ever seen from cars to bottles of soda reached its destination and became available for purchase due to supply chain management.
In this article, we’ll be explaining and discussing the components of the supply chain management process, and the steps involved in it. We will also be discussing the challenges and obstacles faced in supply chains, as well as future trends for the industry.
Key Components of Supply Chain Management Process
The planning process is arguably one of the most important supply chain processes. It consists of a few different parts, including demand planning, sales and operations planning, and inventory planning.
Demand planning involves forecasting customer and manufacturing demands. It ensures that enough products can be reliably produced and delivered to customers on time. If done correctly, it can improve the accuracy of revenue forecasts, and help a company manage its inventory levels.
Sales and operations planning is a process where supply chain managers analyze key drivers in supply chains. These drivers include inventory management, production, demand management, and sales and marketing. This planning process gives executives the information they need to make more informed decisions when trying to improve supply chain efficiency.
Inventory planning helps supply chain professionals determine the amount of inventory that will be needed, as well as how soon this inventory can be produced and delivered.
SCM relies heavily on choosing the right suppliers, and then building strong relationships with them.
When choosing a supplier, a supply chain manager needs to weigh up the pros and cons. This is because they need to choose a supplier that will provide them with the amount of raw materials they need at a good price. They will also need to ensure that these suppliers will be able to deliver these raw materials in a timely fashion.
These factors will need to be discussed during contract negotiations. During these negotiations, a supply chain management company will need to stipulate certain requirements that its suppliers will need to meet.
These stipulations usually relate to the quality of the raw materials, the cost, the timeframe in which they will be delivered, and the procedures that will be taken if things go wrong.
Once these negotiations are complete, and a suitable supplier has been chosen, orders can then be placed and shipments can be tracked.
Professionals in the logistics management department will need to keep track of these orders and try to ensure that they are delivered on time.
Once the materials have been delivered, they will then need to be manufactured into finished products. The manufacturing processes needed to transform raw materials into finished products will differ depending on customer demand, and the type of products that need to be produced.
The most common processes for large-scale supply chains include repetitive manufacturing and continuous manufacturing.
Before these manufacturing processes can begin, the correct order management processes also need to be put in place. These processes help determine the amount of materials that are needed to fulfill a customer’s order.
When the amount of materials needed has been determined, a supply chain management company then needs to determine the equipment and employees needed to create the products.
Capacity planning is used in a supply chain to figure out the equipment and production personnel that will be needed to meet customer demand on time. Once this has been determined, these employees can get to work and start producing products. However, the quality of these products needs to be checked before they can be sent off to customers.
Quality control is an important aspect of the production process that can help with customer relationship management. This is because customers expect their products to meet certain quality standards.
Once quality standards have been defined, products will need to be tested to ensure that they are not defective. If there are a large number of defective products, then a root cause analysis is performed to find the underlying cause of these problems.
Once all of the products have been produced, and they have met quality standards, they need to be delivered to customers. Before this can happen, the finished products need to be stored and organized in a warehouse.
Warehouse management involves optimizing storage space to make the most of available space. It also entails ensuring that products are stored in the correct areas of the warehouses and that stock levels are replenished on time to meet demand.
These products need to be stored correctly to make it easy to complete orders. This process entails picking the correct products from the warehouse, packaging them, and then getting them ready for delivery.
Transportation management refers to the delivery process. It involves choosing the best transportation methods and shipping routes. These methods and routes need to be chosen based on the time it will take to deliver products, and how much it will cost to deliver them via these methods.
Once the products have finally reached the customer, supply chain management professionals need to be ready to receive feedback. This feedback could relate to the quality of the products, or how long it took to deliver them.
It is in the best interests of any supply chain management company to maintain customer satisfaction. This is because customers that experience bad customer service likely won’t return.
8 Steps Involved in SCM Process
1. Understanding Customer Demand
The first step in the supply chain management process is to determine what products customers want and how many of these products they want. Once, this has been determined, plans need to be put in place to meet this demand.
These plans usually entail determining the amount of raw materials that will be needed, and if this demand can be met with the current equipment and staff on hand.
2. Designing the Supply Chain Network
Once customer demand has been fully understood, supply chain managers need to design a supply chain model that will be able to meet this demand. This model will need to include things like:
- Which supplier to source raw materials from.
- What manufacturing facilities and equipment will be needed to produce these products.
- How and where these products will be stored.
- What methods and routes will be used to deliver the finished products.
3. Procuring Raw Materials
Once you have created an effective supply chain model, it will need to be put into action. When a suitable supplier has been chosen based on how soon they can deliver raw materials, how much they will cost, and if they will be able to meet customer demand, plans will need to be made to have these materials delivered.
A lot of the time extra materials may be needed in case there is an unexpected demand or disruptions in the supply chain.
4. Managing Inventory
When the raw materials have been delivered and received by the supply chain management company, they will need to be stored and then monitored. This will help ensure that the inventory levels can be used to meet demand and that inventory levels don’t get too high, and take up too much space.
When inventory levels start to drop, there needs to be processes in place to ensure that more materials are ordered in a timely fashion.
5. Manufacturing and Production
When the materials needed to produce products have been acquired and stored adequately, they can be changed into finished products. However, the number of employees and the equipment needed to do the job will need to be determined.
Employees can then start producing these products, but they will need to be checked against the quality standards set by the customer before they can be stored and distributed.
6. Warehousing and Distribution
Once these products have made it through the quality control process, they need to be stored appropriately. This means making sure that these products are in the correct areas of the warehouse, and that they aren’t taking up more space than they need to.
This makes it much easier to locate the products when they need to be shipped to customers.
7. Delivering the Product
When the products have been inspected, tested, and appropriately stored in the warehouse, they are then ready to be delivered to customers. Deliveries are usually conducted via ship, plane, or truck, depending on where the products need to be delivered to, and how urgently the customers need them.
8. Managing Returns and Repairs
After a customer has received their products, supply chain management companies need to be prepared to replace or repair defective products. With the number of products some supply chains produce and deliver, there are bound to be some defective products that pass through inspections.
All a supply chain management company needs to do is ensure that they repair or replace defective products in a timely fashion.
Challenges and Obstacles
There are many challenges and obstacles that can affect supply chain performance. Some of the most common challenges include:
- Globalization and supply chain complexity: The larger and more complex a supply chain is, the more likely it is for things to go wrong. Globalization has caused supply chains to become much longer, as more and more materials are sourced from other countries to cut costs.
- Supply chain disruptions: Natural disasters, material shortages, and transportation issues are challenges that all supply chains can face. These issues can cause a supply chain management company to fall behind on customer expectations.
- Lack of coordination and communication: Supply chains consist of a large number of parties, and if these parties don’t communicate and work well together then issues can arise.
- Data and technology issues: Most industries rely heavily on technology these days, and supply chain management companies are no different. However, this also means that when this technology does not function properly, issues can arise.
Future Trends in Supply Chain Process
The supply chain management process has experienced many changes in recent years due to the introduction of AI and machine learning. These advancements have streamlined many processes like demand forecasting and made them much simpler.
This technology will likely be used to an even greater effect in the future, and many more processes will be simplified by both AI and machine learning.
Blockchain technology has also improved the supply chain. It provides enhanced security by using cryptographic techniques to secure transactions and prevent fraud.
It has also improved transparency in the supply chain, as blockchain technology allows all parties in a supply chain to access the same information.
Supply chains seem to be trending towards being more ethical and sustainable. This is because the industry has a negative impact on the environment, and professionals within the industry are doing what they can to reduce this impact for the sake of the planet.
All in all, the supply chain management process has many different components that all need to work together seamlessly for a supply chain to be effective. Effective supply chain management is crucial for businesses, as it ensures that they get quality products delivered to them on time.
It seems as though the supply chain management process is trending toward becoming more ethical, sustainable, and automated.
What is the supply chain management process?
The supply chain management process refers to managing and coordinating all of the processes involved in producing and delivering goods and services.
What are the components of the supply chain management process?
The four main components of the supply chain management process include planning, sourcing, production, and delivery.
What are the steps involved in the supply chain management process?
The eight steps in the process are as follows:
- Understanding customer demand
- Designing the supply chain network
- Procuring raw materials
- Managing inventory
- Manufacturing and production
- Warehousing and distribution
- Delivering the product
- Managing returns and repairs