How Supply Chain Management Works for Companies

One of the best ways for a business to serve customers well is to make effective supply chain management a strategic priority. 

What is supply chain management? 

Simply put, supply chain management oversees all processes that integrate suppliers so they can work efficiently together to move products from creation to the customer's hands, while monitoring supply and demand along the way.

According to David Frayer, Assistant Dean for Outreach & Engagement at Eli Broad College of Business, Michigan State University, and instructor in the MSU online Supply Chain Management Certificate program, this is about delivering highly customized product shipping: "The primary focus of the supply chain is to meet the consumer value proposition, deliver products to the location they want in the form they want with the unique characteristics they want."

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What is Supply Chain Management (SCM)?

Supply chain management is the management of the flow of goods and services and involves all processes that transform raw materials into finished products. It involves active efforts in simplifying the supply side business activities to maximize customer value and gain competitive advantage in the market.

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How Does Supply Chain Management Work?

According to CIO, there are five components in a traditional supply chain management system:

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Planning

Plan and manage all resources required to meet customer demand for company products or services. After the supply chain is formed, determine metrics to measure whether the supply chain is efficient, effective, provides value to customers, and meets company objectives.

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Sourcing

Select suppliers that provide the goods and services needed to make products. Next, establish processes to monitor and manage supplier relationships. Key processes include: ordering, receipt, inventory management, and payment authorization to suppliers.

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Manufacturing

Organize the activities required to receive raw materials, manufacture products, test quality, pack for shipping, and schedule shipments.

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Shipping and Logistics

Coordinate customer orders, schedule shipments, dispatch freight, send invoices to customers, and receive payments.

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Returns

Establish a network or process to retrieve defective, excess, or unwanted products.

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Read: The Difference Between Warehouse and Warehousing

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Why Is Supply Chain Management Important?

An effective supply chain management system reduces costs, waste, and time in the production cycle. The current industry standard is a just-in-time supply chain where retail sales automatically send a replenishment order signal to the manufacturer. Retail shelves can be restocked almost as fast as products are sold. One way to further improve this process is to analyze data from supply chain partners to see where further improvements can be made.

CIO.com identifies three scenarios where effective supply chain management increases the value of the supply chain cycle:

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Identify potential issues. When a customer orders more products than the manufacturer can deliver, the buyer may complain about poor service. Through data analysis, the manufacturer may be able to predict shortages before the buyer becomes disappointed.

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Optimize pricing dynamically. Seasonal products have a limited lifespan. At the end of the season, these products are usually disposed of or sold at steep discounts. Airlines, hotels, and others with "perishable" products typically adjust prices dynamically to meet demand. Using analytical software, similar forecasting techniques can improve margins, even for hard goods.

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Improve "available to promise" inventory allocation. Analytical software tools help allocate resources dynamically and schedule work based on sales forecasts, actual orders, and promised delivery of raw materials. Manufacturers can confirm product delivery dates when orders are placed — significantly reducing incorrectly fulfilled orders.

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Key Features in Effective Supply Chain Management

The supply chain is the most visible "face" of a business to customers and consumers. The better and more effective a company's supply chain management, the better its business reputation protection and long-term sustainability.

Simon Ellis from IDC in his book The Path to a Thinking Supply Chain¹ defines what supply chain management is by identifying five "Cs" of effective future supply chain management:

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Connected: Can access unstructured data from social media, structured data from Internet of Things (IoT), and traditional datasets available through traditional ERP tools and B2B integration.

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Collaborative: Enhancing collaboration with suppliers increasingly means using cloud-based trade networks to enable inter-company collaboration and engagement.

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Cyber-aware: The supply chain must strengthen and protect its systems from cyberattacks and hacking, which should be a concern for the entire company.

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Cognitively enabled: AI platforms become the control tower of the modern supply chain by collecting, coordinating, and making decisions and taking actions across the chain. Most of the supply chain is automated and can learn on its own.

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Comprehensive: Analytical capabilities must be measurable with data in real-time. Insights will be comprehensive and fast. Delays are not acceptable in the supply chain of the future.

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Many supply chains have started this process, with participation in cloud-based trade networks reaching all-time highs and major efforts being made to strengthen analytical capabilities.

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Shipping Solutions for Smooth SCM

ABC Express helps you retail business operators face shipping challenges through Mid Mile Cargo:

1. Offers shipping services with FTL (Full Truck Load) or using one exclusive truck only for your business shipments, so it can arrive faster.

2. Availability of many vehicle options from small to large units, according to retail business needs.

3. Real-time tracking process during cargo shipment.

4. Shipping insurance protection.

The completeness of the Mid Mile shipping solution above can make your retail business shipping more efficient and easy.

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