The presence of supply chains has existed since ancient times, dating back to the creation and sale of the very first product or service.
With the emergence of industrialization, supply chain management became more sophisticated, allowing companies to produce and deliver goods and services more efficiently.
Now, what’s exactly supply chain management? Let’s see…
Supply Chain Management (SCM)
Supply chain management (SCM) is, at its most basic level, the control of the movement of materials, information, and money involved in the production of a product or service, from the acquisition of raw materials to the delivery of the goods at the intended location.
Is SCM and logistics the same?
Despite many people mistakenly thinking that the supply chain and logistics are the same thing, logistics is only one part of the supply chain.
Today’s digitally-based SCM systems encompass material handling and software for all parties engaged in order fulfillment, information tracking, and the creation of goods and services, such as suppliers, manufacturers, wholesalers, carriers, and retailers.
What are the supply chain activities?
Generally, supply chain activities include procurement, product lifecycle management, supply chain planning (including inventory planning and the maintenance of enterprise assets and production lines), logistics (including transportation and fleet management), and order management.
For your information, SCM can also include activities related to global trade, such as managing global suppliers and multinational production processes.
What is end-to-end supply chain management?
End-to-end supply chain management refers to the entire supply chain process, from product design and raw material procurement to final product delivery and after-sales customer service.
If you keenly research, in the early days of retail, the steps in this process were segmented, with little understanding of how one related to the other.
A person who manages the entire supply chain process plays a vital role in the field. Their primary responsibility is to maximize efficiency and profitability across the supply chain. To achieve their targets, they must regularly review certain points and make improvements.
That said, we are in the modern time. How do we utilize the technology to optimize the SCM processes? Let’s look at 7 ways to effectively optimize the same.
Seven effective ways to optimize supply chain management:
1. Knowing About Tier 2 Suppliers
As supply chain managers, you must constantly remember that the chain does not start with your company’s suppliers. Instead, it starts with your suppliers’ suppliers—those who give them the raw materials, parts, and sometimes even services.
Knowing these suppliers’ names, the products they offer, their prices, and their lead times is crucial since you may use this information to bargain for higher prices when ordering in bulk.
2. Negotiating Supplier’s Cost of Goods
Even though an agreement has previously been reached with suppliers, if they have improved their internal procedures, it may still be possible to renegotiate it.
As supply chain managers, you should be able to renegotiate the year-over-year expenses (to an order of 3–5%) established in the agreement with suppliers because they are continuously seeking methods to cut their costs.
3. Sharing Demand Information with Suppliers
If a company and its suppliers don’t share demand information, there’s a chance they won’t have enough supplies. The inverse could also be true, and suppliers may be stockpiling too much inventory. If that’s the case, they overspent in order to meet demand.
As a result, whether or not it is communicated, that cost will be passed on. It is critical to understand the financial implications of both scenarios, which includes knowing what to revise and cancel. The lead times of a supplier should be checked on a regular basis to ensure that they can still respond to any changes in the order.
4. Precise Customer Demand Planning
Despite the impression that customers know exactly what they want and when they want it, careful customer demand planning may reveal otherwise. Although customer estimates are an excellent place to start, market analysis, a look at the customer’s past, seasonality, the competitive environment, and more may help you understand and plan for their needs far better.
The supply chain costs may be reduced with the aid of this thorough form of planning.
5. Making Inventory Records Accurate
Although physical inspections are still advised, warehouse management solutions are a great way to maintain an accurate inventory record. The only way to guarantee absolute accuracy is to conduct physical inventories and regular, systematic cycle counts.
Without it, there is a greater chance of late shipments to your clients or unnecessary stock purchases. It is advisable to take this on your shoulders yourself.
6. Improving Risk Management
Planning is essential… Throughout a supply chain, there are numerous potential problems that must be controlled. That necessitates having a regular plan, a backup plan, and even a backup plan for backup plans. Planning ahead for any eventuality can keep things moving along and prevent the organization from losing money when things don’t go as planned.
In the event of inclement weather, for example, it is critical to plan alternative routes or find alternate carriers ahead of time.
7. Optimizing Supply Chain Logistics
Individual logistics processes and their impact on overall supply chain efficiency should be considered frequently by supply chain managers.
For example, could and should that process be automated? What impact might it have on productivity, efficiency, customer service, and cost savings? It may come as a surprise to supply chain managers, but automating the loading and unloading of trucks transporting goods between factories and warehouses ranks very highly across these criteria.
For one thing, automated pallet handling significantly reduces the risk of service delays, accidents, and damage during loading or unloading. It saves thousands of labor hours and eliminates the need for expensive forklift trucks entirely.
Furthermore, fewer trucks are only required to transport the required number of pallets per day with a faster and more reliable loading and unloading process. This results in less idling time and more time for strategic planning, such as adapting routes to potential traffic restrictions, avoiding peak traffic hours, or adjusting the service schedule to the most productive internal workflows.
Wrapping up
As we discussed, the supply chain has evolved from ancient times to the present day in an advanced way due to technology, and the process itself will continue to become more advanced in the future.
For any product or service, the supply chain needs to be properly maintained because an inefficient supply chain can have negative effects on the product or service that needs to be delivered to the customer.
Nevertheless, I hope that the information presented above has alleviated all of your concerns about the supply chain and the people who manage it.
Furthermore, if you have any queries regarding the supply chain or logistics, do not hesitate to contact us. We have people with over twenty years of experience in the field to back you up.