Supply chain management is a process of planning, organizing, and controlling the entire flow of goods, services, and related information from the point of origin to the point of consumption. The term “supply chain management” is used in many different contexts. The most common usage is in reference to the logistics activities that are required for managing supply chains.
If you’re currently managing a supply chain, then this article is meant for you. It’s going to talk about strategies to improve your supply chain management abilities and how to leverage existing capabilities. Supply chain management is just another way of saying logistics. A supply chain is all the activities required to move a product from where it’s made, all the way through to where your customers are.
Elements of the Supply Chain: Some Background on How It Works
Supply chain management is a process that includes the collection, procurement, manufacture, distribution, selling, and servicing of products.
The supply chain management process flowchart begins with an understanding of what is needed for the customer. The company then searches for suppliers to fulfill the requirements with their own value proposition. This is where strategic sourcing comes in. Strategic sourcing helps to identify suppliers who can provide the best value proposition and are cost-effective while also meeting quality standards.
The next step in this process is procurement planning, which includes identifying what needs to be procured and how it should be procured. The last step in this process is a production planning, which includes deciding on how many units will be produced and when they will be produced by each supplier.
Tips to improve supply chain management
1. Get qualified in Supply Chain Management
Learning by experience is a recognized way of learning skills. However, there is a way to cut the learning curve and increase your knowledge far quicker. That is to study from those that have already learned the role inside out. For example, the Masters in Supply Chain Management from Kettering University is an online master’s degree specializing in supply chain management.
2. Plan Ahead
It’s important to have a plan before you start. It’s best to be somewhat flexible with your supply chain management plans, but it is still best to make a plan that includes realistic timeframes. It is important to have a timeline because things don’t always work out the way they are planned. Things happen that require additional time or resources, so it’s important to build in some flexibility so you can accommodate these changes.
3. Optimize Company Inventory
It is important to have a good amount of inventory on hand. If there is not enough inventory, then the production or service levels will be adversely affected. On the other hand, if you have too much inventory, the time and money spent holding the excess can be just as detrimental. Much of your costs can be traced back to inefficient inventory management.
4. Improve Your Distribution Network
Flexibility is another key element that is needed in supply chain management. When planning the flow of a product from supplier to end customer, you need to make sure that your routes and processes are flexible enough to handle changes. If you are using a standard distribution network for your products and services, then it may not be able to handle the unexpected changes that come up. For example, maybe one of your supply chain partners will go out of business for an extended period or an accident caused by bad weather might require that you operate additional distribution centers.
5. Use the Latest Technology
Technology is important to business and supply chains. You can easily collaborate with other supply chain partners, streamline your planning workflows, implement real-time stock valuation, avoid errors and miscommunication, and increase the effectiveness of your logistics processes as well as your brand reputation.
6. Nurture Good Supplier Relationships
It is vital to building your relationship with suppliers and partners by being consistent and regular with communication. It’s also very important to maintain and improve the supplier relationships throughout the life of your supplier relationships.
You can then call on the support of your suppliers when you have an issue that is outside of your control. They will help you adjust to the change so that you can continue to operate at full capacity and efficiency.
7. Be a Good Team Player
Another important point is to remember that real success on the supply chain management team is teamwork. You are responsible for your part of the operation, but you also need to be considerate of how your actions and decisions affect your supply chain partners as well as customers. Communication is also an essential element of teamwork.
8. Review Your Procedures
If there is one constant that we can rely on, it is that everything changes. So, you must review your procedures regularly. For example, you may have new suppliers, new partners, or new customers. It is important to be flexible with the way that you manage your flow of products or services so that the changes are handled correctly and efficiently.
9. Know Your Customers
Knowing your customers is not just about recognizing their needs and wants, but it’s also knowing how to work with them in a manner they are likely to appreciate most. You will want to know your customers’ needs because this can help you deliver the products and services that they need. You will also want to understand the purchasing habits of your customers so that you can anticipate their needs and be there with a solution before they need it or even realize they need it. It can be useful to create surveys or focus groups to find out more about your customers so that you can tailor your supply chain management to fit their needs.
10. Build Your Supply Chain Team
Optimal supply chain management requires that you have a strong, knowledgeable, and experienced team. Great communication is vital for any successful team, so you must have a team made up of people who are capable of communicating effectively with each other and with your customers as well.
11. Stay Ahead of the Competition
Make sure you are keeping up with the trends in supply chain management. The most impressive companies are always looking for ways to improve their services and increase efficiency while reducing costs at the same time.
12. Be Open-Minded
Finally, you need to keep an open mind to new ideas and concepts. New technologies will be released regularly, so you must stay current with the best practices in supply chain management and planning. Additionally, new techniques will be adopted by your suppliers or customers, so you will want to keep an eye on this to see if there are new methods that can improve your processes for better efficiency or effectiveness.
Why is Supply Chain Management Important?
Getting your supply chain management right can mean the difference between being successful or your business failing. By following the above tips, you massively increase the chances of being successful and benefiting from the following:
Improved Customer Service
Supply chain management is about improving your customer service. By improving your supply chain, you will have a better and more timely product than you could ever imagine.
Faster Product Delivery
As soon as you’ve got the right supplies and network in place, your customers will be getting their product and service quickly. Speed is central to supply chain management.
The more efficient and effective your supply chain operations are, the higher profits you can expect to make. A study conducted by Walmart suggested that the amount of profit gained from reducing the duration of shipments by just 12 minutes per day increased by $9,000 per day on average (source).
Reduced Operating Costs
By finding ways to make your supply chain more efficient, you can drastically reduce your operating costs. This includes:
- Decreases in purchasing costs – This will come about by being able to order in smaller quantities, cut out middlemen, or just buy from cheaper suppliers.
- Lower transportation costs – This will come from better and smarter logistics strategies. You’ll be able to use the most effective routes and shipping methods and re-route around delays. Also, you won’t need as many trucks on the road at once.
- Reduced inventory costs – By monitoring your supply chain closely, you’ll notice the points where inventory becomes excessive and find ways to reduce this (such as pulling products off shelves that aren’t selling).
- Better use of capital – If you know what types of products are in demand, you can place bigger orders with suppliers when these are selling well.
Supply chain management has become a vital component of almost every industry, including manufacturing, service, retail, and distribution. Regardless of the size or scope of your organization, supply chain management can help you improve your customer service as well as maintain consistent performance and profits. As with any complex business function, supply chain management should be done in an organized and systematic manner to ensure that all necessary activities are completed. In the future, expect your supply chain management capabilities to grow at a rapid pace. You will want to make sure that your environment is structured in such a way that it can handle the added capacity as well as retain your current level of performance.