Supply Chain Mangement (SCM) - Basic Concepts

Supply Chain Management is defined as the process of managing the production and distributional flow to ensure flawless delivery and distribution of its products. It is one of the most important business activities to increase profits and customer satisfaction. 

SCM deals with the management of all the processes which are involved from creating raw material to delivering the final product to the consumer. In this article, we have discussed the objectives of supply chain management with a complete illustration and examples. We made it very simple for you to understand SCM objectives.

Supply Chain analytics provide the manager a flow chart where they can analyze each and every step of product distribution and point out the problems in the system. For instance, in case of a big order, the manager can look into the stock availability and speed up the production process of the product to ensure that the customer receives his order on time.

Simply SCM, or Supply Chain Management, is the set of processes needed to define production requirements, negotiate contracts with suppliers, automate purchases and deliveries from suppliers, and automate the process to receive invoices and make payments. Let’s break it down into 6 steps.

Table of contents

• Planning
• Sourcing
• Making
• Delivering.
• Returning.
• Enabling.
• Objectives of Supply Chain Management
• Price Optimization
• Improving Efficiency
• Customer Satisfaction
• Better Coordination
• Identifying problems
• What is the diffrence between scm and logistics?

Planning 

The initial stage of the supply chain process is the planning stage. We need to develop a plan or strategy in order to address how the products and services will satisfy the demands and necessities of the customers. 

In this stage, the planning should mainly focus on designing a strategy that yields maximum profit. For managing all the resources required for designing products and providing services, a strategy has to be designed by the companies. Supply chain management mainly focuses on planning and developing a set of metrics.

Enterprises need to plan and manage all resources required to meet customer demand for their product or service. They also need to design their supply chain and then determine which metrics to use to ensure the supply chain is efficient, effective, delivers value to customers, and meets enterprise goals.

Sourcing 

Companies must choose suppliers to provide the goods and services needed to create their products. After suppliers are under contract, supply chain managers use a variety of processes to monitor and manage supplier relationships. Key processes include ordering, receiving, managing inventory, and authorizing supplier payments.

After planning, the next step involves developing or sourcing. In this stage, we mainly concentrate on building a strong relationship with suppliers of the raw materials required for production. This involves not only identifying dependable suppliers but also determining different planning methods for shipping, delivery, and payment of the product. 

Companies need to select suppliers to deliver the items and services they require to develop their products. So in this stage, the supply chain managers need to construct a set of pricing, delivery, and payment processes with suppliers and also create the metrics for controlling and improving the relationships.

Finally, the supply chain managers can combine all these processes for handling their goods and services inventory. This handling comprises receiving and examining shipments, transferring them to the manufacturing facilities, and authorizing supplier payments.

Making

Supply chain managers coordinate the activities required to accept raw materials, manufacture the product, test for quality, the package for shipping, and schedule for delivery. Most enterprises measure quality, production output, and worker productivity to ensure the enterprise creates products that meet quality standards. 

The third step in the supply chain management process is the manufacturing or making of products that were demanded by the customer. In this stage, the products are designed, produced, tested, packaged, and synchronized for delivery. Here, the task of the supply chain manager is to schedule all the activities required for manufacturing, testing, packaging, and preparation for delivery. 

This stage is considered the most metric-intensive unit of the supply chain, where firms can gauge the quality levels, production output, and worker productivity.

Delivering

Often called logistics, this involves coordinating customer orders, scheduling delivery, dispatching loads, invoicing customers, and receiving payments. It relies on a fleet of vehicles to ship products to customers. 

Many organizations outsource large parts of the delivery process to specialist organizations, particularly if the product requires special handling or is to be delivered to a consumer’s home. 

The fourth stage is the delivery stage. Here the products are delivered to the customer at the destined location by the supplier. This stage is basically the logistics phase, where customer orders are accepted and delivery of the goods is planned. 

The delivery stage is often referred to as logistics, where firms collaborate for the receipt of orders from customers, establish a network of warehouses, pick carriers to deliver products to customers, and set up an invoicing system to receive payments.

Returning

The supplier needs a responsive and flexible network to take back defective, excess, or unwanted products. If the product is defective it needs to be reworked or scrapped. If the product is simply unwanted or excess it needs to be returned to the warehouse for sale. 

The last and final stage of supply chain management is referred to as the return. In this stage, defective or damaged goods are returned to the supplier by the customer. Here, the companies need to deal with customer queries and respond to their complaints, etc. 

This stage often tends to be a problematic section of the supply chain for many companies. The planners of the supply chain need to discover a responsive and flexible network for accepting damaged, defective and extra products back from their customers and facilitating the return process for customers who have issues with delivered products.

Enabling

To operate efficiently, the supply chain requires a number of support processes to monitor information throughout the supply chain and assure compliance with all regulations. Enabling processes include finance, HR, IT, facilities, portfolio management, product design, sales, and quality assurance.

Objectives of Supply Chain Management 

Price Optimization 

An important objective of Supply Chain Management is to optimize the process of product sales based on the market conditions and stock availability. By carefully analyzing the chain, a company can increase or decrease the prices of its products to match its short-term goals. For example, products such as Air Conditioners, Heaters, are seasonal and their prices have to be set dynamically by observing the market demand during different times of the year. This also applies to all the products which have a limited shelf life such as packaged foods and drinks. Whenever the products are approaching their expiry dates, the company can reduce their prices to boost up the selling process which will save them from suffering a huge loss. 

Improving Efficiency 

All businesses aim to increase their profit to earn higher revenues. To do this, they need to keep track of the cost of labor, production, and distribution. This can be achieved by Supply Chain Management. By analyzing the customer needs and market situations, they can look for opportunities to change their strategy wherever required to cut down costs. Moreover, a business can also keep an eye on the potential risks and problems at different stages on the chain to minimize them and provide quality services to its customers. This helps the companies to gain a competitive advantage over others in the market.

Customer Satisfaction

Another important aspect of a business is improving customer satisfaction. Supply Chain Management helps the managers and business owners to ensure that the products that the customer receives are of good quality. This can be done by keeping standard checks at different stages of SCM to make sure that the product is of high quality. If a product is found to be defective at any stage, it can be replaced with another product to provide the absolute best value for the customer. SCM also ensures that there is a proper return or refund system available, in case a customer receives a defective product. This improves the consumer experience and helps to build trust between him and the company. 

Better Coordination 

Coordination is one of the most important factors to run a successful business. Lack of coordination among different levels of the supply chain can result in huge losses and decreased product quality. Supply Chain Management makes sure that the communication between the employees, customer, and the manager is crystal clear. The customers can inform the managers about their requirements and the managers can then change their product supply according to the need of the customer. This chain also results in better coordination among various transportation channels for faster pickup and delivery of goods from different locations at the perfect time. A well-managed supply chain provides better control and high flexibility to reduce supply time. 

Identifying problems 

No matter how organized a company or business is, mistakes related to products and customer services are bound to happen at some point. A Supply chain helps in identifying the causes of those problems and resolving them as soon as possible. this also allows a customer to share its feedback so that the company can work on the shortcomings and come up with a solution to improve the quality of their services.

What is the difference between SCM and logistics?

In order to satisfy customer expectations, logistics is an element of the supply chain process that plans, implements, and regulates the efficient, effective forward and reverse movement and storage of products, services, and associated information between the point of origin and the site of consumption. 

Collaboration between companies to link suppliers, consumers, and other partners as a way of increasing efficiency and generating value for the end consumer is what Supply Chain Logistics Management is all about. 

Supply chain management operations are viewed as strategic decisions in the textbook, which establishes "the operational framework within which logistics is executed. It's crucial to note that, while the phrases aren't interchangeable, they do complement one another. 

It is impossible for one process to exist without the other. Here are some significant distinctions between the two terms that will assist you avoid conflating the two. Supply chain management is a method of connecting important business operations within and across organisations to create a high-performance business model that generates competitive advantage. 

The transportation, storage, and flow of products, services, and information within and beyond an organisation is referred to as logistics. The primary goal of supply chain is to gain a competitive edge, whereas the primary goal of logistics is to fulfil consumer needs.