What is Supply Chain Management (SCM)?

Are you struggling with a slow supply chain that disrupts when the demand is high or do you struggle to maintain the profit margins? These signs show that your supply chain is not optimized. An unoptimized supply chain can lower your profit and can cause delays that will result in an inefficient business.

Supply Chain Management comes to your rescue with strategies and methods that can optimize your supply chain. Whether it is sourcing raw materials or delivering finished goods to the customers, a supply chain is responsible for all of these steps. An optimized supply chain ensures that the operations are performed smoothly, and customers get what they want at the right time.

Table Of Content

• Supply Chain Management Definition
• Importance of Supply Chain Management
• Key Components of Supply Chain Management
• How Supply Chain Management Works?
• Types of Supply Chain Models
• Challenges in Supply Chain Management
• Role of Technology in Supply Chain Management
• Conclusion

Supply Chain Management Definition

According to the definition, Supply Chain Management is the process that optimizes the supply chain to improve its efficiency. The Supply Chain Management Process takes care of every stage that is involved in a business to keep its customers satisfied. This can range from sourcing raw materials to their conversion into products, and from storing them in the warehouses to delivering them at the doorstep of end consumers. 

With an optimized supply chain, businesses need not worry about their shipments getting lost or the supply chain getting disrupted. This is because supply chain management works with technology and tools that can provide better insights into the supply chain. 

If the customers are satisfied with the product and the delivery, then it proves that the supply chain is optimized. Customer satisfaction not only depends on the logistics but is backed up by other operations like procurement, inventory management and relationships with the suppliers. 

If you take the example of a car company, the cars that are on display at a dealership do not just come there. There is a long chain of processes behind it like procurement of metals, tyres, plastics, etc. and then after the manufacturing, they are transported to dealers.

Importance of Supply Chain Management

It is important for a business to attain Supply Chain Optimization as it ensures the efficient performance of the organization. After going through the following reasons, you’ll understand the Importance of supply chain management:

Environment Sustainability: SCM follows best practices to operate a supply chain and hence the wastage is reduced which results in sustainability.

Supplier Relationships: To procure the best raw materials, building good relations with the suppliers is important and SCM helps with that.

Better Efficiency: With SCM, wastage can be reduced and that leads to reduced costs by ensuring efficient workflow.

Cost Reduction: SCM suggests the best routes for transportation, by optimizing the supply chain, and hence overall costs can be reduced.

Risk Identification and Management: There are certain risks involved with the supply chain that can delay the workflow, SCM identifies these risks and suggests methods to resolve them.

Lead the Supply Chain Industry with Confidence

Enroll in Our Supply Chain Program

Explore Program

Key Components of Supply Chain Management

Supply Chain Management is difficult to implement without understanding its key components. Every stage of a supply chain requires proper planning and implementation, without proper understanding, a supply chain could be inefficient. The following are the key components of Supply Chain Management:

Planning:

Planning is the very first component of supply chain management. In this stage, you figure out the market demand, consumer expectations, and forecast demand in terms of sales. Once you have these data points at your disposal, you define the rest of the components of supply chain management and how they will work in tandem. Basically, planning is a stage, where you lay the foundation for the entire supply chain management process.

Procurement:

The procurement process involves sourcing raw materials or the goods that you use during the manufacturing process to meet the customer’s demands. SCM optimizes the procurement process by building relations with the suppliers so that the best quality raw materials can be procured. This will reduce the overall costs and you will achieve higher profit margins.

For example, a furniture company will procure the best quality of wood so that furniture can be of the best quality and customers can be satisfied.

Production:

Production or manufacturing is the stage where procured raw materials are converted into final goods. You’ll have to optimize the production stage as well so that demands can be met. By optimizing production, businesses can maintain efficiency, reduce costs, and reduce wastage, while maintaining the quality of products and meeting deadlines.

For example, a car company has to manufacture hundreds of cars of the same type, so they can set up an assembly line to avoid mistakes in production.

Inventory Management:

The inventory management process makes sure that enough stocks are available at all times so that demands can be met. With the use of technology and tools, you can manage your inventory by tracking the stocks in real-time, predicting future needs, and reducing wastage.

For example, with the help of inventory management systems, you can track your inventory and keep the stocks fulfilled.

Warehouse Management:

Are you worried about where to keep your finished goods? Here comes one more component of the SCM which is Warehouse Management. Businesses can use tools to organize their warehouses to keep track of the items and their storage space. An organized warehouse makes it easy to deliver the products on time.

For example, if you are a frozen food manufacturer, then you can design a warehouse that remains cold at all times so that the inventory remains in a good state.

Logistics:

Logistics is the major component of the supply chain. If the products are of the best quality but they get lost during shipments or get damaged, then it will result in waste. To avoid this situation, SCM plans the logistics in the best possible way to reduce delays and maintain product quality. 

For example, GPS and RFID Tags are installed so that shipments can be tracked.

How Supply Chain Management Works?

If you want to know about how supply chain management works? We have mentioned some easy-to-follow steps for supply chain strategies:

• You have to maintain Communication with the suppliers and stakeholders for efficient procurement of raw materials.
• Next, you have to Plan customer demands to ensure that production is done efficiently to meet those demands and there is no wastage.
• Now, with the use of technology, you can share real-time updates of shipments with consumers so that they can track their orders.
• If your supply chain is optimized then it will reduce delays by organizing production schedules, transportation routes, and warehouse locations.
• Next, you have to gather Customer Feedback, which will help your business improve the supply chain.

Types of Supply Chain Models

Depending on the requirements of a business, supply chain models can be of many types. Following are some of such models:

• The Agile Supply Chain Model is designed for the business where the demand is variable. 
• The Continuous Flow Model is designed for companies where the demand is steady.
• The Fast Chain Model is for businesses that move their products in the market quickly. 
• The Efficient Chain Model is best for businesses that have to compete on prices.
• The Flexible Model is for companies that face fluctuations in demand because of seasons or festivals.
• The Custom configured Model is a mix of Agile and Continuous flow models that allow businesses to customize their supply chain and work efficiently.

Challenges in Supply Chain Management

If you think setting up an optimized supply chain is easy, then you must know about the challenges that you’ll encounter in supply chain management: 

1. Operational Delays: Operational delays can be a challenge because of natural disasters, bad weather, etc.

2. Increase in Costs: Costs of raw material, transportation, human labour, etc. are increasing day by day, you’ll have to face this challenge as it will increase the overall costs.

3. Demand Variation: Another challenge that you’ll face is varying customer demands during festive seasons. This variation in demand can disrupt the supply chain.

4. Logistics Delays: One challenge that you’ll face is in the logistics because of transportation and storage.

Role of Technology in Supply Chain Management

In today’s world, technology is everywhere, supply chain management also uses technology and tools to ease your process of optimizing the supply chain and improve efficiency. Some of the roles of technology in supply chain management are:

• Tools like Inventory Management Systems and Warehouse Management Systems can be used to handle stocks in inventory and alert businesses about the same.

• Technology promotes the Automation of processes to handle repetitive tasks. Automotive tasks reduce the chances of risks and errors.

• With tools like GPS and RFID tags, real-time tracking of shipments and operations can be done.

• Technologies like Artificial Intelligence and Machine Learning can be used for analyzing the demands and optimizing operations.

• Blockchain helps you manage the security and transparency of your supply chain.

Conclusion

Supply chain management improves the efficiency of your business by optimizing the supply chain. It includes procurement, production, inventory, and logistics. These operations, when optimized, will help your business lower costs, reduce wastage, and provide customer satisfaction. We hope this article helps you understand the nuances of Supply Chain Management. If you are looking to learn a Supply Chain Management Course online in a systematic manner from top faculty & Industry experts then you can enrol for our best Supply Chain Management course.

FAQs