Basics of Supply Chain management - What a beginner should know
The broad field of supply chain management includes all the procedures, frameworks, and tactics for streamlining the manufacture and distribution of goods. Planning for demand, inventory control, logistics, purchasing, and supplier management are just a few of its many facets. Supply chain management, which was initially created as a manual paper-based process when early 20th-century businessmen were required to enhance manufacturing, is now inextricably linked to 21st-century technology. However, as the pandemic has shown, without worldwide integration and precise data, technology is just as likely to result in supply chain breakdown as it would be to prevent it.
In today's article, we will discuss Supply chain management in a manner which is easier even for a beginner to comprehend. Let's get started.
Supply Chain Management: A Brief Introduction
The management of the movement of goods, data, and money from suppliers of raw materials to the end consumers is known as supply chain management (SCM). It makes sure the appropriate goods or service gets to the appropriate location at the appropriate time in the appropriate amount. SCM encompasses all operations, including acquiring raw materials, producing goods, supplying finished goods, and operating retail locations. Reverse logistics may occasionally be a component of SCM. For instance, transporting materials (such as defective goods for reuse or sales returns) from the point of sale to a warehouse or manufacturing facility.
Supply Chain Management: The 5 Components
Companies that practice effective supply chain management avoid costly recalls and legal proceedings as well as the media spotlight. In the following points, we will discuss the components of a supply chain management process.
Planning is the first component in the SCM process where the goal is to match the supply with the client and manufacturing demand to achieve optimum outcomes. The needs of the future must be anticipated by businesses, and action is taken. This has to do with the raw materials required at every stage of manufacturing, the capability and limitations of the equipment, and the personnel requirements throughout the SCM process. To gather data and create plans, large organizations frequently rely on modules from ERP systems.
Strong supplier relationships are a critical component of effective SCM processes. The process of sourcing entails collaborating with suppliers to provide the raw materials required all across the manufacturing system. When sourcing products, a business may be able to plan and collaborate with a supplier. The sourcing needs will vary, though, depending on the industry. SCM sourcing typically involves making certain that:
The raw materials satisfy the requirements for manufacturing the goods.
The prices paid are consistent with what the market would anticipate.
In case of unforeseen circumstances, the vendor can deliver emergency supplies.
The supplier has a track record of timely and high-quality deliveries.
The company's transformation of raw materials into something new through the use of tools, labor, or other outside forces is at the core of the supply chain management process. Although supply chain management has not yet been completed, this final product is the end goal of the manufacturing process. Assembly, testing, inspection, and packaging are a few examples of sub-processes that fall under the manufacturing process. A company must be aware of waste and other under its control variables that could lead to changes to the original plans while the manufacturing process is underway. For instance, if a company finds it's using more materials and components than it had anticipated and sourced because its employees were not properly trained, it must address the problem or go back to the SCM process's earlier stages.
A business must put its goods in the hands of its clients after production is complete and sales are closed. Given that the customer hasn't yet used the product, the distribution process is frequently considered a contributor to the brand's image. Strong SCM procedures give a business strong logistical resources and delivery options to guarantee the timely, secure, and affordable delivery of goods. This includes having a backup plan or diversified distribution channels in case one mode of transportation becomes momentarily unusable. How might a record snowfall in the vicinity of a distribution center affect a company's delivery procedure, for instance?
Assistance with product and customer returns brings the supply chain process to an end. It's worse when a purchaser decides to return an item because the business made a mistake. Reverse logistics is a common term for this return procedure, and the business needs to make sure it has the resources to accept returned goods and properly assign refunds for those returns. Customers and the company interact when a customer returns something, according to many. To identify faulty goods, out-of-date goods, or non-conforming goods, intercompany communication is a crucial component of customer returns, though. The SCM process will have been unsuccessful if the underlying cause of a customer return is not addressed, and subsequent returns are likely to continue.
With this, we reach the end of this content. To summarize what we discussed, we first learned about supply chain management in brief, and then we discussed the 5 components of a supply chain management process, which include planning, sourcing, manufacturing, delivering, and returning.
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