Supply chain management, or SCM, is a key aspect of producing goods and services. It coordinates every step of the process, recording the details of each aspect to create a picture of the supply chain and improve or maintain its efficiency.
With all its different steps and considerations, navigating this process can feel like climbing a mountain. To increase your production efficiency, here’s our step-by-step guide breaking down SCM, its role and how to conduct it.
What Is Supply Chain Management?
Supply chain management is the organisation of the entire production flow of goods or information related to a particular product or service. A company creates a system of links to track every step they complete to produce an item or service. This chain covers the entire process, from raw material to a final product to delivery to its destination.
The Importance of Supply Chain Management
The key responsibility of supply chain management is ensuring that a company’s processes are as efficient and economical as possible, although there are many other benefits to SCM. It ensures that every step of the manufacturing, sales and delivery process is scheduled and all the products required have been sourced. Without this, you risk delays in production as items are sourced and tasks are completed later than expected.
By performing supply chain management correctly, businesses benefit from restricting their wasted resources, whether that’s time, money or products, and produce better quality products in a shorter time frame.
What Are The Benefits Of Supply Chain Management?
Good supply chain management helps your production run smoothly. By running an SCM process, you can benefit from
- Increased efficiency and lower waste
- Increased ability to analyse and predict consumer demand
- Improvements in quality of products and services
- Improved supply chain visibility to lower risks and predict changes
- Lower overheads and improved cash flow
- More efficient logistics
- Increased sustainability
- Reduced risks of recalls due to faults
How Does Supply Chain Management Work?
Supply chain management works by linking the supply chain and preparing for the next step. It also works on the principle that a product coming onto the market is created through the work of multiple different facilities and facilities along the supply chain.
A vital component of SCM is supply chain traceability. A company must be able to trace every product in the supply chain and how it has been transformed. This information provides insights to lower costs, process time and waste and increases the efficiency of the supply chain.
5 Steps Of The Supply Chain Management Process
The SCM process follows five key steps which must be understood and quantified to bring a product or service to the market. By doing this, a company can predict changes to their processes and adapt to them to establish efficient production. At each step, break down where items are coming from, their costs, size and storage needs.
1. Planning
Planning is most likely the most important step in SCM. You must understand the customer’s and manufacturing process requirements to fulfil them. Predict your future needs: raw materials for manufacturing, the capacity and limitations of your equipment and facilities and then the staffing requirements along the entire process.
One of the major needs for production that is often overlooked is storage. Without appropriate planning, this can cost a lot of money in waste and delays during the sourcing, manufacturing and delivery processes. Stock control and warehouse management are key elements of preparation as well as calculating holding costs to factor into your costs and supply chain management.
2. Sourcing
Your suppliers are crucial to your supply chain; managing these will prevent faults in the production process. Sourcing includes:
- Any raw materials needed for production. Ensure that these meet your specifications.
- Paying competitive market prices for these materials.
- Your supplier is flexible and can deliver emergency materials if required.
- The supplier has a track record of delivering quality goods in good time.
- Securing your supplier is vital for all industries but even more so if you work with perishable goods.
3. Manufacturing
Your manufacturing process involves transforming the raw materials from your supplier into a product for a customer. It is likely to be divided into smaller steps like assembly, testing, quality inspection and packaging. Be aware of any waste in the process as you might use more raw materials than you originally intended to.
4. Delivering
After you’ve sold your product, you must get it to your customers. Making this convenient for customers is crucial as they still haven’t interacted with your product yet so delivery contributes to their concept of your brand. Delivery is completed in multiple ways but you have to manage it or you will have a backlog of products and a lot of annoyed customers.
You need to create reliable logistics solutions to do this. Create a process that coordinates customer orders, deliveries, invoices and payments and create backup delivery solutions to prevent further delays.
Consider the size of your deliveries and where they need to go. Large orders might require heavy haulage or groupage to distribute, as well as package slips to accurately track items that are being shipped. And, if you are shipping abroad, understanding DDP shipping and UK customs clearance will help you avoid unnecessary delays and charges.
Another important aspect of delivery is protecting your goods, as your customers need to receive fully intact products. Use things like dunnage to protect your products in delivery so they are ready for the customer to use. In addition, protective wrapping offers another layer of support to your packaging.
5. Returning
Being able to accept returns of unwanted products is pivotal for customer relations. By having a helpful customer service team to provide an easy return and refund, you add to a customer’s experience with your company after they’ve received a product which isn’t correct, potentially encouraging them to buy from you again.
Look after your intercompany communications during this process as you might have to identify and rectify inappropriate products. By not looking after an existing issue in your supply chain, you risk future problems and refunds.
Example Of Supply Chain Management
Effective supply chain management is implemented in all industry-leading businesses, giving them a competitive advantage.
Amazon
Amazon’s E-commerce model of supply chain management is excellent. Their in-house methodology means they have created a supply chain to make it easy for consumers to purchase and receive their products from home, making them one of the world’s largest companies. They source their items from manufacturers, bring them into automated warehouses and make two-day delivery an expectation with regular offers of next-day delivery, free of charge. They also accept free returns to enhance the customer experience so they buy from Amazon again.
Tesla
Tesla created a vertically integrated supply chain to avoid incurring procurement and transportation costs for parts manufactured by other companies. This vertical integration means they can build their luxury cars in California without raising their prices to meet the high real estate prices and wages. It also means they can develop new technologies and products without time-consuming collaboration.
Key Features Of Effective Supply Chain Management – The Five Cs
As supply chain management moves forward and becomes more efficient, there is an increased requirement for supply chain decisions to be made instantly.
Simon Ellis theorises about how the five Cs digitally drive supply chain management:
- Connected- Ensure that everyone involved in the supply chain can access and transfer data through multiple channels
- Collaborative- Connecting your networks and collaborating on different supply chain steps increases each task’s efficiency.
- Cyber-aware- Your supply chain must be protected from cyber attacks to prevent compromising data and steps from failing.
- Cognitive- A thinking supply chain will solve problems. Using AI to coordinate decisions based on data it has collected automates your supply chain and makes decisions far quicker than others.
- Comprehensive- Coordinating analytics in real-time with fast insights means that AI has all the information to make rapid decisions.
Supply Chain Management And Technology
In the modern digital world, there are many benefits to integrating digital solutions into your supply chain management process. There are various technological systems you can use to optimise your SCM.
The Cloud
With the increased need for SCM to be fluid and adaptable, using an online cloud to share data means it is available to anyone, anywhere there is an internet connection. This flexibility helps you overcome any issues in your supply chain.
Blockchain
Blockchain is a great tool for aiding trade partners and their supply chain collaboration. It digitises assets to record actions conducted within the supply chain. This chain allows parties to visualise their supply chain to track products from raw materials to the customer.
It also removes banks from the process and leverages cryptocurrency to make transactions.
AI
Artificial intelligence automation has the potential to revolutionise SCM as a learned AI can make decisions far quicker than a human. An AI with central control over your processes takes insights on each step and uses them to calculate more efficient solutions.
How Breakwells Can Help Your Supply Chain Management
To manage your supply chain, you require a reliable storage and delivery system to get your products from the manufacturer to your customers.
With 50+ years of experience in the storage and inventory management industry, Breakwells is one of the UK’s leading haulage and logistics experts. Our delivery services come fully insured to secure your products during shipping. We can help you find a storage solution that best suits your business. To discover how we can help, get in touch today.