Supply chain management is the entire production flow of creating and delivering a product starting from materials all the way to a finished product on the customer’s doorstep. This includes supply and product planning, demand planning, sales and operations planning, and supply management. A company will create a network of suppliers that make sure the product is moving along the production process to then be given to whoever has direct contact with the users.
How Does it Work?
Supply chain management has 5 main components to it, planning, sourcing, manufacturing, delivery and logistics, and returning.
Planning is where you plan and manage all resources needed to meet customer demand for the product or service. In this process you want to make sure to determine the metrics you will be using to measure whether it is efficient, effective, delivers value to the customer and meets company goals.
Sourcing is the process of choosing the right suppliers who will provide the goods and services needed to successfully create the product. Continuing to monitor and manage supplier relationships, through processes like ordering, receiving, managing inventory, and authorizing supplier payment, will create an easy to work with environment.
Manufacturing includes the organization of the activities needed to accept the materials, make the product, test the quality, and package the product for shipping and delivery.
The delivery and logistics process is the coordination of customer orders, when deliveries will happen, dispatch loads, invoice customers, and receive payments.
Returning is the creation of a process or network to take back the unwanted or defective products.
Why is Supply Chain Management Important?
Effective supply chain management create a production cycle that minimizes cost, waste and time. Supply chain has become quick and easy to use to automatically signal when the products need to be replenished. Then the product can be restocked just as fast as it is sold. A way to improve this already fast new way of utilizing supply chain management is by continuously analyzing the data that is gathered from the partners in your supply chain.
There are a few scenarios that having effective supply chain management will help you add value to the supply chain cycle by using the data gathered. One of those is identifying potential problems. By utilizing the data, the manufacturers can anticipate a shortage before the customers are disappointed.
Another scenario is when trying to optimize the price of things dynamically. For instance, if an item is almost to the end of its shelf life, the seller will want to adjust the price to help the product sell faster. Using analytic software, some of those similar forecasting techniques can improve margins, even for non-perishables.
Your supply chain management will make or break your business and how successful it is. through the data collected from every link in your supply chain, you can forecast what how long production will take and when you will need to reorder to restock your shelves. Your company can only work if your supply chain management is working. Keeping the aspects of your supply chain in check will make sure you keep your customers and your suppliers happy.