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What is Supply Chain Management?

Today, the first way to create satisfaction in the customers who buy the products of the organizations is to deliver the product to the customer in the fastest and most reliable way. With the increasing number of business products and customers, managing the supply chain is becoming more and more complex.  At this point, Supply Chain Management steps in. Supply Chain Management is a business process that responds to the problems of the supply process.

Definition of Supply Chain Management

Supply Chain Management covers the management of all processes, including production, from procurement to delivery to the final consumer. It allows the creation of end-to-end visibility so that organizations can monitor the flow of services and goods.

The supply chain encompasses all the activities, people, organizations, information and resources required of a product from inception to transport to the customer, and its ultimate goal is to satisfy customers' requests. Supply Chain Management, on the other hand, provides supply and demand management in all members and channels within the supply chain. Supply Chain Management includes carriers and regulations overseeing the transportation of goods and is a business process that allows to management of operations, logistics and inventory levels as part of coordinating buyers and suppliers.

Supply Chain Management provides a holistic view of the entire supply chain, from supplier to consumer, and allows for an examination of key areas of people, processes and systems in order to maximize the value of all activities.

What Are the Components of Supply Chain Management?

The Supply Chain Management business strategy basically has 5 components. These 5 components, when applied effectively, increase the value of an organization.

  • Planning
  • Sourcing
  • Making
  • Delivering
  • Returning

Planning

Planning is one of the critical components of Supply Chain Management. In order to meet customers' product and service demands, Supply Chain Managers must plan to use all resources efficiently. He/she anticipates customers' demands and designs a supply chain based on the forecast. The relevant organization then determines how to measure and deliver its supply chain to the desired performance to maximize efficiency. This helps the organization achieve its goals while providing value to customers.

Sourcing

Selecting suppliers to provide the goods, raw materials or services that make up the product is critical to ensure smooth Supply Chain Management. Sourcing strategies include contracting, managing and monitoring existing relationships managing suppliers. A secure and quality relationship with suppliers ensures the best quality of raw materials. This process includes many processes such as ordering, inventory management, receiving, payment and authorization.

Making

Another component of Supply Chain Management is the production of products along with quality tests by coordinating all the steps involved in the creation of products. This step also includes packing the cargoes and checking the delivery schedule. During the production step, businesses often evaluate quality, production output and employee productivity to maintain their overall standards.

Delivering

Logistics ensures that products reach customers and includes coordinating orders, scheduling delivery, shipping, invoicing and receiving payments. In some cases, organizations outsource their delivery process to other organizations that can oversee special handling requirements and home delivery.

Returning

Companies grant the right to return for defective, unwanted and excess products. Supply Chain Managers must develop a network that supports returned products. A defective product must be scrapped or remanufactured, and an unwanted product must be returned to the warehouse. This network must therefore be responsible and flexible to support customer needs.

Why is Supply Chain Management Important?

Supply Chain Management is important for organizations as it provides various benefits. Organizations with poor Supply Chain Management experience costly delays, quality issues, and reputational damage. If organizations, suppliers and processes are not compatible, they may face legal problems.

  • If organizations cannot describe their work and show their success to their stakeholders, they cannot get their support. The supply chain allows organizations to create a picture of the functions and activities that go from the procurement of components and raw materials to the goods supplied to the consumer to produce goods and services. Emerging technologies enable Supply Chain Managers to work closely and in real-time with other supply chain members, enabling organizations to predict potential problems, dynamically adjust prices, and improve inventory and shipping.

What are the Advantages of Supply Chain Management?

Supply Chain Management provides an end-to-end view of the organization to monitor the flow of information, services and goods from supply to production. Supply Chain Management is not a simple undertaking, but when implemented effectively it offers many benefits that improve the profitability of the organization.

  • Flow of correct information
  • Enhanced Quality Control
  • Higher Efficiency Rate
  • Higher Demand
  • Logistic Optimization
  • Lower Overhead Costs
  • Enhanced Risk Reduction

Flow of Correct Information

Most companies lack an automated flow of information across the supply chain. This fragmented information causes companies to lose sales opportunities. Supply Chain Management helps eliminate bottlenecks and enables information to be shared seamlessly. Thus, Supply Chain Managers have the information they need to make more informed decisions.

Higher Efficiency Rate

Having information about raw material availability and production delays, provided by an effective Supply Chain Management, allows companies to implement strategic plans and prevent possible delays. Without this data, problems such as out-of-stock inventory or late-to-consumer shipments would occur. In this case, it would cause a loss of reputation for the organization. Supply Chain Management not only prevents these problems but also helps increase reputation and efficiency rate by supporting the customer experience.

Higher Demand

In a report by VISA, “If consumer sales increase by 5% in a given week, a retailer may order 7% more products in response to the feeling that the increase and demand will continue. What appeared to be a 7% increase in demand is now the next link in the chain that gets a larger order from suppliers and eventually sees a 20 percent increase in factory orders.” Found as the upswing effect, this factor often plays a role in communicating supply and demand changes. Insights gained through the adoption of Supply Chain Management can better predict demand and respond to market conditions to avoid various challenges.

Logistics Optimization

Logistics Management, transportation optimization has been a priority for supply chain managers due to increasing costs in logistics processes. Identifying the most efficient shipping methods for large bulk orders and other shipping scenarios minimizes companies' costs and enables faster delivery of orders to customers. This situation both increases the profitability of the companies and increases customer satisfaction by increasing the savings to the consumers.

Lower Overhead Costs

Accurate demand forecasts mean companies have room for faster revenue-generating inventory, and by stocking less inventory, slow-moving inventory lowers storage overall costs. In addition, Supply Chain Management ensures leaner operations by identifying unnecessary expenditures.

Enhanced Risk Reduction

By analyzing detailed supply chain data, it is possible to identify potential risks and enable the organization to easily respond to unexpected conditions. Organizations can avoid negative impacts by taking proactive measures to address supply chain disruptions, quality control issues, and other issues that may arise. Supply Chain Management helps understand risks, and understanding risks helps implement leaner operations.

 


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