Supply Chain Management Process, Steps & Working

Are you a business owner looking for ways to simplify and streamline your supply chain management process? Understanding the intricate workings of supply chain management can be daunting, but with this blog, we'll provide insight that will help demystify the steps involved in creating an effective system. In this comprehensive guide, we'll take an in-depth look at the importance of supply chain management, explaining elements of supply chain management such as order processing and fulfilment tracking so you can better optimize resources for maximum results. With our helpful information about the supply chain management process, steps, and working, you'll gain valuable knowledge to ensure efficient transactions every time.

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What is Supply Chain Management and Supply Chain Management Process?

Supply Chain Management (SCM) encompasses the entire production flow of goods or services, from the raw components to the final products delivered to consumers. SCM is responsible for ensuring that all aspects of production are coordinated and functioning efficiently to minimize costs while maximizing profits and customer experience. This process includes all steps involved in acquiring, manufacturing, and delivering a product or service to the customer.

The supply chain management process (SCMP) is ongoing and integrated to manage different parts of the company's global supply chain. From planning to controlling the flow of goods or services from suppliers to consumers, the supply chain management process efficiently manages resources to maintain a competitive edge in the marketplace.

The main difference between supply chain management and supply chain management process lies in their scope. SCM involves the coordination of the activities that take place within the supply chain, while SCMP encompasses the entire process from start to finish. This includes sourcing, procurement, conversion and logistics management of products, services, and related information between two or more entities in a supply chain.

How Supply Chain Management (SCM) Works?

Supply Chain Management involves coordinating and handling all activities associated with sourcing and procurement, production, distribution, delivery, and Customer Service. SCM aims to improve the efficiency and economization of supply chains by centrally controlling or linking critical production, shipment, and distribution processes of the supply chain stages. Every company has its own supply chain management process, which may be more or less complex based on the scope and nature of the business. However, all supply chain management processes share some common elements, which we will discuss next.

Elements & Components of Supply Chain Management

The importance of supply chain management process lies in its elements. The six major elements of supply chain management are briefly discussed below:

Ø Plan: One of the crucial components of supply chain management process that involves setting goals, objectives and strategies. It also includes identifying risks and opportunities in the supply chain process.

Ø Source: Sourcing involves selecting and evaluating vendors who will supply items to your business. One of the significant elements of supply chain management process focussing understanding the needs for a particular product or service, researching potential suppliers, negotiating pricing and terms, among other considerations.

Ø Locate: Locating aspect of the supply chain management process is about where goods are sourced and manufactured. It involves deciding the most cost-effective, efficient locations for production or assembly.

Ø Make: One of the important elements of supply chain management process is transforming raw materials into finished products. This could be done in-house or outsourced to another supplier.

Ø Delivery: Delivery in the supply chain management process is about getting the goods from Point A to Point B. It requires considerations such as transportation mode, speed, and cost-efficiency. One of the most vital elements in the supply chain management process where appeasing the buyer or client involved.

Ø Return: The return is associated with the reverse logistics in supply chain management process. It involves recovering any unused materials or products that may be returned due to damage or other issues. It also includes recycling and disposal of returned goods.

Benefits of Supply Chain Management

Let's explore the importance of supply chain management and how having a supply chain management system proves beneficial in transporting goods or products.

Better Collaboration

By streamlining the supply chain process flow, businesses can improve communication and coordination among all stakeholders. It helps organizations to better collaborate with their suppliers and customers. Therefore, the importance of supply chain management process is directly tied to increased efficiency and reduced costs.

Improved Quality Control

A vital part of any business is quality control. It's essential to ensure that products are manufactured to spec and meet customer requirements.

A good supply chain management process is essential for ensuring the quality of products and services. By improving quality control at each stage of the supply chain process flow, businesses can minimize the chances of defective products reaching customers.

Higher Efficiency Rate

Another importance of supply chain management process is to improve the efficiency of the supply chain management system so that businesses can deliver goods and services to customers as quickly and as cheaply as possible. Companies can achieve this goal by improving the flow of information and goods through the supply chain process and optimizing each stage's performance in the process.

Keeping up with Demand

One of the benefits of supply chain management process is that it allows businesses to keep up with demand. By having a well-organized supply chain process, companies can quickly respond to changes in demand and avoid stockouts. It enables enterprises to meet customer needs and maintain a competitive edge.

Shipping Optimization

A robust supply chain process helps businesses answer questions such as what type of transportation to use, what kind of packaging is needed, and how best to store the product or service. Achieving shipping optimization is another crucial benefits of supply chain management.

Improved Risk Mitigation

Supply chain management processes can help businesses mitigate risks, improve efficiency and optimize costs. By understanding the components of supply chain management process and how they work together, businesses can better identify risks and opportunities for improvement. Especially the risks and costs associated with reverse logistics in supply chain management.

Lowered Costs

By coordinating and managing different components of supply chain management process, businesses can reduce waste and inefficiencies. It results in lower costs for raw materials, transportation, and labor.

Increased Revenue

A company can save money on production costs and increase its profits by streamlining the supply chain process and making it more efficient. Establishing an effective supply chain management system with regular updating and automation could increase revenue.

Asset Utilization

Asset utilization is one of the key benefits of the supply chain management process. By optimizing the utilization of assets throughout the supply chain or supply chain process flow, businesses can improve their overall efficiency and productivity.

Functions of Supply Chain Management

The supply chain management process involves managing the flow of information, materials, and finances as they move through the supply chain. Supply Chain Management aims to deliver the correct goods and services to the right customers within the promised time and at the right price.

Here are some key functions of Supply Chain Management:

Purchasing

Purchasing involves assessing needs, researching suppliers, negotiating prices and terms, and placing orders. The purchasing process is an integral part of supply chain management because it helps ensure that the company has the necessary materials and supplies to meet customer demand. You may explore various procurement solutions before settling on what is best suited for your business.

Operations

The operation is one of the vital functions of supply chain management. It facilitates the day-to-day activities involved in managing the supply chain. It includes forecasting demand, procuring materials and products from suppliers, managing inventory, and shipping products to customers.

The operations work closely with other parts of SCM, such as the planning and control functions, to ensure that the supply chain management flow is smooth.

Logistics

Logistics, in the supply chain management process, ensures that goods and materials are delivered to customers in a timely and efficient manner. There are four main supply chain stages of logistics: transportation, warehousing, inventory management, and customer service. Our ultimate guide on procure to pay may be helpful to explore best practices.

Resource Management

One of the most critical functions of supply chain management is to ensure timely delivery of goods and services to customers. To achieve this, SCM must coordinate the activities of all stakeholders involved in the Supply Chain, including suppliers, manufacturers, distributors, retailers, and end customers.

Information Workflow

Information flow is vital for different stages of supply chain management. After all, if the various parts of SCM can't communicate, then the whole system breaks down.

Different Types of Supply Chain Management Processes

Supply chain management manages the flow of goods and materials throughout the supply chain. However, there are several types of SCM processes. Each of these processes has its unique characteristics and is suitable for different kinds of businesses as follows:

✔   Demand Management

These types of supply chain management are responsible for ensuring that customer demand is met. It involves managing the flow of orders from customers and the distribution of products to meet those orders.

✔   Supply Management

Supply Management or Make-to-stock (MTS) is the most common type of SCM process. It is typically used by companies that produce products that are in high demand.

In an MTS process, goods are manufactured and stocked before customers place an order. This type of SCM process is suitable for companies with a good understanding of customer demand and can accurately forecast future demand.

✔   Sales and Operations Planning (S&OP)

The Sales and Operations Planning (S&OP) type of SCM is responsible for planning and managing the flow of materials, information, and money between different parts of the Supply Chain.

The main goal of S&OP is to ensure the right products are produced at the correct time, in the correct quantities, and delivered to the customers who need them.

S&OP is a continuous process that is constantly being updated as new information becomes available.

✔   Product Portfolio Management

Product portfolio management is all about managing a company's products as a group. This process helps businesses decide which products to produce and sell and when and where to sell them.

Parts of a Supply Chain Model

    Customer Relations Management

Customer relations management (CRM) is the process of managing customer relationships. It includes marketing, sales, customer service, and billing activities. The goal of CRM is to create and maintain a good relationship with customers. It is done by providing them with the best possible experience. CRM also helps businesses keep track of customer data. This data can help improve marketing efforts, target sales, and provide better customer service.

     Customer Service Management

By definition, the supply chain management process encompasses the flow of goods and services from supplier to customer. Customer Service Management, then, manages the interactions between customers and businesses to ensure that customer needs are met.

     Demand Management Style

It entails forecasting future customer demand and ensuring that the Supply Chain meets this demand. There are two main methods of demand management: the push method and the pull method.

     Order Fulfilment

Order fulfillment ensures that an order is complete and accurate and that all the necessary steps have been taken to prepare and ship the order to the customer.

There are four main parts to any order fulfillment process:

• Order management: It includes taking an order from a customer, ensuring that it is complete and accurate, and then sending it on to the next stage in the fulfillment process
• Inventory management: It means tracking and managing the inventory levels of all the products and parts required to fulfill an order
• Shipping and logistics: This process ensures that an order is shipped to the customer on time and in perfect condition
• Customer service: Ensuring that the customer is happy with their order and providing them with any assistance they may need

     Manufacturing Flow Management

Manufacturing flow management is managing the flow of materials and information through the manufacturing process. Manufacturing flow management aims to ensure that the manufacturing process runs smoothly and efficiently and that finished products meet customer requirements.

     Supplier Relationship Management (SRM)

It is managing interactions with suppliers to get the best value for your company. SRM includes all aspects of the relationship between your company and its suppliers, from initial contact to supplier performance evaluations.

     Product Development and Commercialisation

Product development and commercialization are two important parts of the Supply Chain. Understanding the steps involved in each process is essential to ensure a successful product launch.

The first step in product development is market research. It helps to identify potential customers and understand their needs. Once the target market is identified, the next step is to develop a product that meets their needs. It involves creating a prototype and testing it to meet all required standards.

After the product has been developed, the next step is to commercialize it. It includes creating marketing materials and strategies and developing a sales plan. It is also important to develop a distribution strategy to ensure that the product is available to customers when they need it.

By understanding the steps involved in product development and commercialization, companies can improve their chances of success when launching new products.

     Returns Management

One of the essential parts of the Supply Chain is Returns Management. Returns management is the process of handling products that customers return. It can include anything from repairing or replacing the product to issuing a refund. Returns Management is a vital part of the Supply Chain because it can significantly impact customer satisfaction.

There are several steps in the returns management process:

Returns Management Steps:

1.  Receiving the return

2.  Inspecting the return

3.  Processing the return

4.  Shipping the return

SCM vs. Supply Chains

SCM and Supply Chains are very similar in nature, but there are a few differences between SCM and Supply Chains:

Supply Chain Management Best Practices

Make the move to real-time supply chain planning

Real-time Supply Chain planning is the ability to track and respond to changes in your Supply Chain as they happen. It means having visibility into every stage of your operation, from raw materials to finished goods, and being able to make changes on the fly to keep your production moving.

In a world where global Supply Chains are becoming increasingly complex, real-time planning is essential for businesses that want to remain competitive. Responding quickly to changes in demand or the marketplace can help businesses avoid disruptions to their Supply Chain and keep their production moving.

However, real-time Supply Chain planning is not without its challenges. Coordinating the different parts of a Supply Chain can be difficult, and making changes on the fly can be difficult without the right tools. But with careful planning and execution, real-time Supply Chain planning can be a powerful tool for businesses of all sizes.

Unify supply chain planning with enterprise planning

It's important to ensure that all the different parts work together seamlessly to get the most out of your SCM system. One way to do this is by unifying your Supply Chain planning with your enterprise planning. Enterprise planning means setting and achieving strategic objectives across an organization. By aligning your Supply Chain planning with your enterprise planning, you can ensure that your Supply Chain is working towards the same goals as the rest of your organization.

Anticipate the demand of the end customer

In the Supply Chain Management process, it's essential to anticipate the demand of your end customers. It will help you ensure that your Supply Chain can meet their needs and avoid any disruptions. There are a few parts of the Supply Chain Management process that are key to consider when trying to anticipate customer demand

• The Supply Chain flow: The movement of goods and materials through the various parts of the Supply Chain, starting from suppliers to manufacturers to distributors and finally to retailers
• The Supply Chain steps: A few steps in the Supply Chain process need to be managed to ensure smooth operations. These steps include procurement, manufacturing, logistics, and distribution
• The Supply Chain Network: This refers to the relationship between the various parts of the Supply Chain, including suppliers, manufacturers, distributors, and retailers

Leverage real-time data across all points of the supply chain

Leveraging real-time data across all points of the Supply Chain can help organizations keep track of inventory levels, optimize production processes and manage customer expectations more effectively. In today's fast-paced business environment, having visibility into the entire Supply Chain is critical to success.

Ensure the flexibility to cope with change

The strength of a Supply Chain is determined by the strength of its weakest link, so one must ensure that every part of the process is efficient and can adapt to change. It can be a challenge, as the Supply Chain is constantly evolving. But with the right planning and execution, businesses can ensure that their Supply Chain is flexible enough to cope with change.

The first step is to understand the different parts of the Supply Chain and how they work together. It will help you identify potential bottlenecks and areas where changes are possible to improve efficiency.

Next, you need to develop a plan for how the Supply Chain will operate. This plan should consider the different parts of the Supply Chain and how they interact with each other. It should be able to allow for changes in the future.

Technology in Supply Chain Management

Technology plays a crucial role in optimizing and perfecting the supply chain management process. Technological tools can streamline the supply chain management process flow of businesses. We have listed a few below to consider:

• IOT- Internet of Things: IOT connects physical devices to the internet, enabling data exchange and interaction with other connected devices. This provides supply chain managers the ability to track and monitor inventory, equipment, vehicles, and personnel in real time. It also allows for automated control of processes such as order fulfillment or shipment tracking.
• RFID- Radio Frequency Identification: RFID tags are tiny chips that contain a unique serial code that can be read by RFID readers. They can quickly and accurately identify individual items in a large shipment, allowing for more efficient inventory management. RFID proves beneficial while inwarding and outwarding goods in bulk quantities.
• Advanced Analytics: Advanced analytics can analyze large amounts of data from different sources, providing valuable insights into customer trends and preferences and potential problems or opportunities in the supply chain. This helps to make informed decisions and enhance the supply chain management process flow.
• Automation: Automation is vital in modernizing supply chains. It involves using software systems to automate certain tasks, such as order fulfillment, inventory tracking, shipment tracking, etc. Automation increases efficiency and reduces costs and increases customer satisfaction.
• Augmented Reality and Virtual Reality: Augmented reality (AR) and virtual reality (VR) enable supply chain managers to handle operations better. With AR, managers can visualize data in 3D or see information overlaid on a physical product or environment. VR allows them to virtually explore the environment and interact with products in a simulated way.

What are Supply Chain Stages?

The stages of supply chain management involve the progression of goods and services through different phases. These steps include- procurement, production, distribution, and sales. These stages of supply chain management are interdependent. The success of each stage is dependent on the successful implementation of other stages.

• Procurement is the first step in a supply chain where the raw materials, components, and other inputs are purchased from suppliers.
• Production is the next stage of supply chain management, where material resources are transformed into a finished product.
• Then comes distribution, where goods are transported to customers across locations.
• The final stage in a supply chain is sales. It includes marketing and selling of products and services to end-users.

The overall goal of a supply chain is ensuring an efficient flow of goods and services from production to consumption. This enables companies to reduce costs and increase profitability in the long run. By managing the different stages of supply chain management effectively, organizations can maximize productivity and minimize waste.

Why Is Supply Chain Management Important?

The importance of supply chain management cannot be overstated.

1. It helps companies to control manufacturing processes and ensure product quality.
2. By shipping efficiently and avoiding shortages or oversupplies, the Supply Chain Management process can improve customer service while also increasing profits.
3. It encompasses all the steps involved in getting a product from the supplier to the customer, including sourcing, manufacturing, warehousing, and transportation.
4. Streamlining the Supply Chain and making it more efficient can help companies save money and time while also ensuring that products are high quality.
5. Implementing a successful SCM strategy requires understanding all the steps involved in the process and the ability to manage each one effectively.
6. With the help of Supply Chain Management processes, companies can gain a competitive advantage by ensuring that their products are available when and where they are needed
7. By managing the Supply Chain effectively, companies can improve their bottom line and create a more sustainable business.

Examples of Supply Chain Management

Supply Chain Management is coordinating all activities necessary to produce and deliver goods or services.

Supermarkets are a great example of supply chain management. Supermarkets order products from various suppliers and keep track of inventory levels to ensure they have the right stock at the right time. They must also manage transport and logistics and customer service.

Automotive companies manage the supply of parts from numerous suppliers and keep track of inventory levels and production processes. Retailing companies are another example of Supply Chain Management in action. Retailers must order products from manufacturers, manage warehouses and distribution centers, and ensure that their customers are receiving the right products at the right time.

It's important for companies because they need to organize their Supply Chains correctly if there are any issues along the way so everything doesn't come crashing down on them!

Advanced Planning and Scheduling (APS) Software

As anyone in a Supply Chain Management process will tell you, efficient operations depend on having the right parts and materials on hand when you need them. That's where advanced planning and scheduling (APS) software comes in. APS systems are designed to help companies plan and schedule their production processes more effectively, resulting in a leaner, more agile Supply Chain. APS systems are a part of the larger category of Supply Chain Management (SCM) software. SCM software is used to plan and manage the flow of goods and materials through the Supply Chain, Supply Chain, from raw resources to finished products. APS systems can optimize production planning and scheduling, two of SCM's most essential and challenging aspects.

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Conclusion

Having a well-managed Supply Chain is critical to the success of any business. By understanding the parts of the Supply Chain Management process and following the Supply Chain Management flow, businesses can ensure that they get the most out of their Supply Chains.