In a world where quick commerce is becoming a new revolution, supply chain complexities are growing one step further. It’s no secret that companies around the world invest heavily in building robust supply chain management processes. For every business, the supply chain acts as a vital cog in success, ensuring a seamless flow of materials, product planning, demand planning, operations, and sales planning alongside the delivery of products to end consumers.
This is what makes SCM critical. As an aspiring professional, if you want to define and design strategic activities in supply chain management that create a positive impact, you must first understand the foundational principles behind every supply chain management process. Let’s dive in to learn more!
Table of Contents:
What is the Supply Chain Management Process?
Supply chain management is fueled by information. It generally starts with businesses trying to understand market trends, what kind of products customers want, and when they want them. This data is then used to optimize components of supply chain management, such as planning, sourcing, manufacturing, and delivering the product to the end consumer. If we add one more element, returns, we will have a complete picture of the supply chain management process.
Though this depiction might seem simplistic, it packs a huge complexity. Within these steps, raw materials are sourced, products are formulated with strong R&D, and they are then delivered to every last-mile consumer. So, the process itself is mammoth in scale and size.
Step Involved in Supply Chain Management Process
Let’s dig deeper and break down every stage of the supply chain management process in detail:
1. Planning
Planning is the component that lays the foundation for supply chain management. Here, you ask a lot of questions and try to get their answers using data. In this step, you figure out the needs of end consumers, forecast demand for your product, and configure elements of the supply chain that would allow you to build the product and get it in the hands of the end consumers at the optimal cost, resources, and time.
Supply chain planning doesn’t just stop at forecasting demand; it also defines the objectives and metrics that would allow your progress in the right direction. Around these metrics, you outline the strategy for the supply chain. You figure out supplier sourcing, transportation mechanisms, optimal routes & costs, etc.
Risk analysis is another crucial aspect of planning. Imagine you’ve forecasted the number of products you want to create this year. But out of nowhere, some natural calamity erupts in your key supply warehouse. In that case, you will have too little in your warehouse shells, unmet demands, and disrupted business flow, making your business go haywire, right?
Thus, effective planning anticipates possibilities of risks and builds strategies to mitigate them. So, we can say that planning is the stage that makes sure that every link in the chain remains resilient and adaptable.
2. Sourcing Raw Materials
The sourcing of raw materials is the second stage of supply chain management, which deals with making the raw materials available. In this step, you build strong relationships with raw material suppliers and create strategies for shipping, delivery, and payment processes. The success of this stage is measured in terms of the quality and reliability of your supplier network.
At this stage, we can easily make one deduction that would involve a lot of negotiation and contractual work. One more thing to keep in mind is that this is not a one-off task but an ongoing iterative process. Businesses consistently have to re-assess the quality of supplies, timely delivery, etc., to ensure there is no potential risk.
3. Manufacturing
Manufacturing is the step where sourced materials are converted into a tangible product. In this step, first of all, the raw material quality checks are carried out. The metrics that can be used to carry out this evaluation include supplier fulfilment rates, price accuracy, and material checks against expectancy. Companies also track the flow of materials throughout the manufacturing process in terms of materials used, goods manufactured, etc. This helps build the inventory visibility.
Next, the products are designed, developed, and synchronised for delivery. During this process, businesses aim to optimize efficiency and minimize waste while producing goods with the highest quality standards. Since the final product is produced in this step, this step naturally becomes the most metric-intensive step. Companies would go ahead and analyze product quality, production output, workforce productivity, and more.
4. Delivery
In this stage, the supplier ensures that products reach the end consumers at their desired locations. We can call this phase a logistics phase, where the goal is to optimize product delivery. Companies work on managing order processing, setting up warehouses, choosing the best carriers for delivery, and defining the invoicing system to organize payments efficiently. This phase is all about getting the products into the hands of end consumers efficiently and as fast as possible while keeping costs under check.
5. Returns And Reverse Logistics
Returns are the final element of the Supply Chain Management Process. This stage is also termed reverse logistics since products are picked up from the customers and moved back to the manufacturer or processing plants. Customers generally return products for several reasons, including defects, damage, or dissatisfaction with the product.
The returns process helps businesses to minimize the risk to the customer. Moreover, this process can lead to getting valuable feedback for the improvement of future products and also earning trust from customers.
How to Optimize Supply Chain Management Process?
The supply chain management deals with manufacturing your product and then delivering it to every last-mile customer. The value chain SCM touches upon is significant, and thus, getting the process streamlined might be a complex undertaking. But, with the right strategy, you can turn a chaotic supply chain process into a cost-effective, super-efficient machine that brings positive results for your organization. We have discussed some of the supply chain management optimization strategies that you can leverage below:
Choose the Right Supply Chain Management Model
One solution doesn’t fit all. The SCM model that works for other businesses might not be the best fit for you. Thus, it’s very critical to carry out a comprehensive analysis of which model aligns well with your business goals and objectives before making a decision.
For example, the supply chain management models can be categorized into two major parts: Lean and Resilient. The lean supply chain management model focuses heavily on reducing costs. In this method, while building products, you try to reduce the possibility of waste as much as possible. This kind of model works well for just-in-time inventory systems, where you bring in materials only when needed. However, one flaw in the system, like a delay from the supplier, can stop production as there wouldn’t be any safety stock.
On the other hand, resilient supply chain management models are built to handle disruptions. With these models, you would keep the safety stocks. While this is a safer option, it brings up another dimension of higher costs and more storage systems into play. So, before choosing one of these models, you must ensure that you strike the balance that your business objective requires.
Run Regular Risk Assessments
While discussing the planning component of supply chain management, we discussed the importance of risk assessments. They’re one of the most important aspects of building any resilient supply chain. You need to come up with ‘what-if’ scenarios that can help you identify all threats and take measures before they arise.
The supply chain process has a lot of moving parts, and thus, there is risk associated with every single part. It can be either internal (lousy planning, staff shortage, poor forecasting, etc.) or external (raw material shortage, unpredictable demand, environmental disruptions, etc). However, if you keep an eye out on these scenarios by running regular risk assessments, you can tackle problems before they arrive and keep your supply chain undisrupted.
Streamline Logistics Network
The well-optimized logistic network is the backbone of SCM. By fine-tuning the routes, warehouse locations, and delivery schedules, you can reduce costs and reach out to customers as fast as possible, improving their experience. You should start by asking questions like:
- Are your routes efficient and smarter?
- Are your warehouses placed close to the key markets?
- Are your customers satisfied with delivery timelines?
Finding answers to these questions would help you determine the efficiency of your logistics network and identify areas for improvement.
Leverage Technology to Improve Practices
The use of technology is not just an option when it comes to supply chain management, it’s super critical. The role of IT in supply chain management has evolved over time. Today, technology is optimizing every component of supply chain management. In the very first planning phase, predictive analytics, real-time tracking tools help you identify bottlenecks, streamline processes, and make data-driven decisions.
Automation tools take over repetitive tasks, autonomous vehicles and robotic systems reduce the amount of human intervention in inventory management, etc. By investing in technology, you can certainly reduce costs and create an effective supply chain strategy that keeps your business on track for success.
Future Trends in Supply Chain Management
The evolution of supply chain management has been rapid, and technology has been at the centre of it. With changing consumer demands and global shifts, below are the trends you should be keeping an open eye for:
Increased Adoption of AI and ML
AI and ML are not part of the distant future; they have revolutionized the outlook of supply chain management at this moment as well. From smart forecasting and route optimization to anomaly detection technology, it is leading the way and helping businesses make winning decisions. By learning about supply chain analytics processes and the technical aspects of AI and ML, you can establish yourself as an ideal supply chain professional.
Sustainability and Green Supply Chains
Due to global warming, companies are adopting a sustainable supply chain as part of Corporate Social Responsibility. Sustainable supply chain practices include the use of ecologically friendly materials, minimizing carbon emissions through more efficient modes of transport, and well-planned production and recycling processes to cut waste. Such practices not only help in the fight against global warming but are also part of CSR’s accomplishments in working towards sustainability; hence, you should be learning about this new trend and how you can incorporate it into your business.
Resilient and Agile Supply Chains
The COVID pandemic taught us many things in terms of supply chain management; it taught us the importance of having resilient and agile supply chains. Now companies want to invest in the diversification of suppliers, building buffer stocks over JIT stocks, technology integration, and building collaborative ecosystem at scale. All of this adoption is being done for only one reason: today, businesses don’t just want to thrive but want to adapt to any change seamlessly.
Conclusion
On a conclusive note, we can say that the supply chain management process is the backbone of business. With the growing complexities of global markets and changing customer demands, supply chain optimization isn’t just a necessity anymore; it’s a competitive advantage. If you’re an aspiring supply chain professional, remember:
A successful supply chain is not just about moving products; It’s about building relationships, creating value, and making sure customers get what they want at the time they desire.
If you can attain this, irrespective of the number of big players, you’ll be able to establish a place for yourself like quick commerce industry found its audience in the e-commerce sector where trailblazers like Amazon, and Walmart exist. However, to do that you need to acquire the knowledge of practices that can get you tremendous growth by leveraging technology, and industry best practices. That’s where upskilling yourself with supply chain management training aligned with Industry 4.0 standards could prove to be of help. Happy learning!