Have you ever wondered how and where the foods you eat every day are sourced? If that’s the case, here’s the answer to your question: “Supply Chain Management”
So, what exactly is a “supply chain”? I’m sure you can figure it out from the name. It is, in fact, an end-to-end link that maps the flow of the goods you have in the market today; from unprocessed/raw materials to well-finished products.
Supply Chain Management allows for the control and a two-way flow of materials, information as well as money; between the producers and consumers. Furthermore, it ensures the appropriate products or services arrive at the right location, at the right time, and in the right quantity, at the right cost
Assume you enjoy milk and want to purchase some. You’ll need to go to a milk store to accomplish this.
Correct?
You are the final consumer/customer (a consumer is someone who consumes a product, whereas a customer is someone who purchases a product).
If a person buys and consumes chocolate, he is both a consumer and a customer; however, if a father buys chocolate and his son/daughter consumes it, the father is the customer and the son/daughter is the consumer).
I hope you understand what I’m saying.
When it comes to getting the chocolate, you have two options:
- Directly from the manufacturer,
- From a wholesaler or distributor, or from a supermarket’s warehouse (in the case of supermarkets) (a place where the goods are stored).
In many cases, the second option is more likely, as it is difficult for a manufacturer to ship items to over 200 million Nigerian retail establishments!!
As a result, producers sell their goods to distributors or wholesalers, who in turn sell them to retailers, and eventually to the customers. This is an illustration of a traditional supply chain.
It’s interesting to note that the client or consumer is at the bottom of the supply chain, while suppliers at different tiers are at the top.
In general, products move from top to bottom of the supply chain, while funds flow from bottom to top, and information flows both ways.
It’s worth noting that product and fund flow can sometimes go the other way. When a customer returns a defective product, it eventually makes its way back to the manufacturer.
The customer’s payment for the goods is returned to the manufacturer! The movement of goods in the opposite direction, i.e. the movement of goods in the opposite direction.
The core concept of Supply Chain Management is the movement of products from raw materials procured from a supplier to finished items supplied to the consumer.
The SCM oversees the entire process by delivering the correct quantity to the correct location at the correct time.
This procedure may differ depending on the industry in which we operate. Make-to-stock, make-to-order, assemble-to-order, engineer-to-order, project manufacturing, distribution, process, and service, to name a few.
Supply Chain Management Consists of Several Functional Areas.
- Production Planning and Control: entails creating various future plans for the business.
- Demand Management: Forecasting and controlling demand fluctuations are central to demand management.
- Sales and Operations: The development of sales and production strategies for a specific time period based on projections and demand data.
- Resource Planning: The process of determining whether a company’s production resources are sufficient is known as resource planning.
- Manufacturing: Production in accordance with the proposed plans (Master Production Scheduling).
- Material Requirments: Materials acquisition for the MPS, they are in charge of production activities such as sequencing, prioritization, work center loads, and task order input and output.
- Inventory Control: entails maintaining an adequate inventory and safety stock balance in order to keep the company moving forward and avoid bottlenecks.
- Requirement For Distribution Plan: Execute inter-plant or inter-company orders, as well as distribution plans from factories to warehouses or distribution procedures.
- Logistics: is the most efficient system for delivering goods on time to customers.
How Does Supply Chain Management (SCM) process work?
Supply chain management is governed by specific fundamental components. Let’s take a quick look at some of the most important components of a supply chain management system.
- Product Movement: The product’s movement or workflow is critical in the design of the SCM model. Product movement must be carefully managed in order to achieve success in any business. To meet a customer’s expectations, timely product transportation from one unit to another, adequate quality control at each step, and timely delivery are critical components. SCM must contribute to the process of product mobility definition.
- Communication and Information Sharing: In business, inappropriate contact can spell disaster. While conducting business, the SCM model should be built in such a way that there is an adequate flow of information from one point to another.
- Timely Order to Delivery: From start to finish, the supply chain management model must meet deadlines. An organization’s success is determined by how well the product is delivered when it reaches the customer’s hands. Throughout the order processing, production, receiving, quality checks, and delivery to the client, the SCM model must be fine-tuned correctly.
- Service After Delivery: Performance management is another critical factor to consider for long-term success. To ensure that the service is well taken care of, the SCM model should include frequent performance assessments and quality checks after delivery. When developing a supply chain management system, it is critical to consider its ongoing expansion.
- Finance: Managing a company’s finances is a component of the supply chain. Accounts payable, inventory management, billing accuracy, and the ability to share expenditures across facilities are just a few examples of critical financial operations that must be correctly stated in the SCM model.
Is Supply Chain Management Important?
Yes, supply chain management is critical, and it has influenced how the organization thinks about product production.
A supply chain is a network of many stages that support manufacturing from raw materials to final customer delivery.
Supply chain management is now concerned with the industrial network’s planning, coordination, and optimization.
As a result, businesses can become more efficient and productive, which is critical for business success.
Supply chain management is a critical component of business, and it is required for the company’s success and customer satisfaction. In the following ways, supply chain management is essential:
- Improve Customer Service
- Reduce operating expenses
- Improve Your Financial position
The Benefits of Supply Chain Sustainability
- Supply chain sustainability benefits businesses and their stakeholders, as well as society and the world as a whole.
- Supply chain sustainability is becoming more important as a board-level issue as businesses strive to become more sustainable and should not be undervalued.
- A company with a sustainable and streamlined supply chain increases its chances of establishing partnerships.
- Individuals and corporations will want to do business with you if you have a sustainable supply chain.
- Assists your organization in lowering its operating costs.
- Increases Profitability.
- Improves the reputation of your brand
Supply chain management is much more than a cost-cutting measure aimed at improving an organization’s operational efficiency.
Modern supply chain management entails strategically aligning a company’s operations from beginning to end in order to maximize market and economic value.
It may also give a company a competitive advantage over its competitors, which is a part of the overall ecosystem.
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