From the cars we drive and smartphones we talk on, right down to the food we eat, the products the population use and consume come as the result of a supply chain. And for these items to go from raw materials into a marketable end product, the complexity of a supply chain needs to be properly managed.
That's where supply chain management comes in. To ensure every element within a supply chain runs as smoothly as possible, the right processes and approaches to things like planning, sourcing and production need to be in place.
Here, we'll cover the processes, technologies and best practices that help all supply chains run like a well-oiled machine.
What is supply chain management?
Before we define the management side of things, it's worth detailing what a supply chain is. Essentially, it's a connected network of individuals, organisations, resources, activities and technologies that are involved in the making of and sale of a product or service.
Supply chain management (SCM), therefore, oversees every touchpoint of the above journey from beginning to end, making sure everything is seamless and smooth.
That means there's a lot of functions, processes and activities at play in a SCM, and all of these falls into one of three levels, which we've detailed for you below.
The different levels of supply chain management
Here, senior management makes decisions that will affect the entire organisation as opposed to individual departments. As a result, they involve a lot of long-term planning.
Examples of strategic planning:
Financial decisions, consumer demand, and an emphasis on value are all part and parcel of the tactical planning stage. That means the processes discussed at the strategic level are defined, with the decisions made serving to minimise risks and ensure costs don't spiral out of control.
Examples of tactical planning:
As the name suggests, operational decisions impact the day-to-day operations of a business, department or individual, and so are designed to ensure the maximum cost-benefit and overall efficiency of the supply chain. Essentially, they're what keeps the whole thing moving.
Examples of operational planning:
The process flows of supply chain management
Decisions made at all levels of the business are linked to one or more of the five primary process flows that exist in SCM. What's more, these individual process flows can be comprised of hundreds of additional macro and micro processes that are in place to keep the supply chain fully functional.
These process flows are as follows:
What tools and technology can help with supply chain management?
Technology can help to reduce shipping errors, organise inventory data, monitor shipping information, and manage orders with vendors and suppliers. Put simply, it's essential to effective supply chain management.
We've listed some of the most effective tools used by modern supply chain organisations below.
If you use inventory management technology and manage thousands of parts, suppliers or product SKUs, asset tracking is a must. Rather than the manual approach, which lacks efficiency and can be vulnerable to errors, automated asset tracking makes your inventory easier to track and monitor.
Combined with the correct signage, asset tracking allows for a complete, customisable process that creates greater efficiency and accuracy in your locations.
Whether it's data analytics and forecasting tools or customer relationship or inventory management software, there's a whole host of software you can use to make your SCM easier. What's more, many of these functions can be combined into a single, fully integrated solution, particularly through the use of enterprise resource planning (ERP) software.
With the ability to accurately track a product through its entire lifecycle, it makes sense that cloud computing is becoming increasingly popular. And that's not the only benefit either; cloud computing's other advantages include:
Facilitating real-time logistics management, there's been a greater adoption of mobility in SCM of late. Because it embraces mobile technology, the process has seen the emergence of greater communications provision within transportation networks, leading to more accurate productivity and efficiency metrics, and the elimination of manual tasks.
What are the challenges of supply chain management?
As SCM seeks to reduce costs throughout the supply chain, globalisation can lead companies to move their manufacturing operations to regions or countries where labour, taxes, raw materials and transportation are more affordable.
This means the procurement network expands, complicating supply chains and leaving companies to navigate manufacturing, storage and logistics across borders. And all of this must take place while the supply chain maintains its usual level of performance.
While sustainability within the supply chain itself isn't a challenge - large and corporate businesses have policies that are geared towards sustainability - it's the interconnected world of globalisation affecting sustainability which poses a problem.
The greater awareness of sustainability has led to further recognition of the cost that poor supply chain management can place on brands and their reputation. And when such liabilities make the news, it can lead to consumer boycotts and damage to the brand, which, when social media is added to the mix, can spread with real speed.
Companies of this size, therefore, must recognise the need to set clear standards for their suppliers to follow. These Codes of Conduct need to be met before there's any commitment to procurement, and then audited on an annual basis.
In relying on tech like cloud computing, security vulnerabilities are more of a problem than ever. And such threats aren't confined to cyberspace either; physical security risks like cargo theft continue to affect supply chain performance.
Because modern supply chains are so large and complex, it makes managing their security a growing challenge. Therefore, a multi-layered approach to security is necessary to ensure a secure end-to-end physical chain of custody.
This also requires clearly defined and enforced protocols, greater adherence to regulatory guidelines and standards, and more advanced physical and cybersecurity tools.
Another large issue in SCM, regulatory compliance makes the problems caused by globalisation even more pronounced.
Environmental regulations, global trade rules, product integrity requirements, and other regulatory concerns all affect the supply chain. Effective regulatory compliance is therefore needed to adhere to the necessary guidelines and standards, including the below:
Supply chain management best practices
So, how can we make sure supply chains function as they should? Try these best-practice tips to maintain performance amid a rapidly changing SCM landscape:
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