Supply Chain Management: Definition and Process

The entire process, from the acquisition of raw materials to the delivery of your product, must be carried out efficiently. Therefore, it is important that you know the management of the Supply Chain . Indispensable!

If you manage the chain properly, not only will you be able to satisfy your customers, but you will even be able to exceed their expectations.

I invite you to study this important business function, through the following topics:

  • What is the Supply Chain?
  • Supply Chain Management .
  • Supply Chain Management Process.
  • Conclusions on Supply Chain Management.
Supply chain management

Management is a discipline dedicated to the study of organizations and performs its function through the administrative process.

Before studying Supply Chain Management, let’s start by first understanding what this chain refers to …

What is the Supply Chain?

The supply chain involves the processes related to the provision of products.

In other words, the processes for making and selling a product.

Of course, in these processes you need the support of other companies. 

Some examples could be, suppliers of raw material or production equipment. There is also the transport or the distributor and even your client (for example, retailers). 

Thus, the chain will be made up of all the companies that act with your company.

And this, from the supply of raw materials, through distribution to placing the product at the point of sale.

Thus, the dimension of the chain will be more complex as your company grows and requires more suppliers or intermediaries.

Effective chain management meets customer needs (above expectations).

At the same time, it reduces costs, for example, transportation, warehouse, packaging, among others.

Suppliers as part of the supply chainSuppliers as part of the supply chain.

In addition to this, it makes tasks more efficient, when it improves the flow of products, optimizes inventory or improves quality.

Likewise, it manages to integrate and take advantage of synergies of the members of the chain, who also benefit.

It is usual that you find terms like “upstream” or “downstream”.

Upstream , it is used to identify the organizations that offer you raw materials and supplies (suppliers).

Downstream , for which your company sells finished products (intermediaries and customers).

Managing the chain upstream or downstream has its own implications, but what you should be clear about is that the process must be customer focused.

Why? Let’s see…

The customer: starting point in supply chain management

Your customer’s demand defines the quantity of the product, its production and distribution. 

In other words, the customer is the starting point for chain planning.

Failure to do so leads to waste of resources and efforts in activities that are not valued by the client.

Hence the importance of listening to the “voice of the consumer”.

Now, the customer is the starting point, but you should not forget your provider for that.

Your provider’s service is also crucial to meet customer needs.

Supply chain: from demand to consumer satisfaction.

Therefore, suppliers also require careful management.

This also includes support service providers, such as software companies , equipment, among others.

In this context, it will be necessary for you to achieve negotiations that foster cooperative and coordinated relationships with your suppliers.

In essence, each link contributes to the competitiveness of your company, so you must pay attention to its management.

Once we are clear about what the chain is and what its focus should be, let’s see what its management is about….

Supply Chain Management

The management of the Supply Chain or Supply Chain Management (SCM) is the process of planning, organizing, directing and controlling the operations of raw material acquisition, production and distribution of the product or service. 

In each of these stages, value is added to the product, which in turn contributes to your company’s competitive advantage.

Their goal will be to ensure that there are no flaws that disrupt the process of meeting consumer needs as efficiently as possible.

Supply chain management requires two aspects to be clear:

  • On the one hand, that you try to generate good communication between the members of the chain. So it is about good relationships.
  • On the other hand, it is very important that the entire organization understands the relevance of being consumer-oriented .

Good management starts from identifying what the client wants and also knowing our own processes very well. 

Now what processes should you consider in the management of the supply chain?

Supply Chain Management Process

The process related to the management of the supply chain, have to do with the customer, with demand or are specific to internal logistics.

These processes are:

  • Customer relations
  • Customer service management
  • Demand management
  • Order fulfillment
  • Manufacturing Flow Management
  • Procurement or purchases
  • Product development and marketing
  • Returns.

Let’s study each of these in detail.

Customer relations

To manage customer relationships, you should try to get to know them, especially those considered a priority for the company.

Additionally, it is advisable to establish agreements to try to ensure the least possible variability in your orders.

When this is not possible, you should try to serve them by establishing relationships with benefits for both of you.

In this sense, the evaluation of our performance in customer service must be permanent, as profitability depends on it.

Customer service management

The results obtained from the performance evaluation provide information for the continuous improvement of the agreements

It also does the same for products / services. 

Of course, there must be coordination between the production and distribution functions.

This in order to fulfill important conditions for the client. For example, quality standards, delivery dates or quantities.

Of course, there should also be clarity regarding inventory availability.

Demand management

Undoubtedly, one of the factors that causes more uncertainty in chain management is the variability of demand. 

The challenge is to balance it with the responsiveness of our company.

In this order of ideas, inventory management is crucial. It includes stock control of both in-process products and finished products.

Likewise, special attention should be paid when these are affected by production failures or changes in supply or demand.

To reduce uncertainty, forecasts are also useful.

It is also common to use systems that allow inventories to be synchronized with those of our most important clients.

Order fulfillment

Obviously, satisfying the consumer takes order fulfillment for granted. However, it is not always possible, but it must be optimized.

To achieve optimization, you must promote integration and maximum efficiency between the production, distribution and transport functions. 

Distribution and transportation will generally depend on business partners. Consequently, seek to develop relationships and agreements that also benefit them.

Manufacturing Flow Management

To achieve efficiency, production must be planned according to the needs of the consumer and since it can fluctuate, the process must be flexible or adaptive.

In other words, the idea is to schedule production in the quantities necessary to meet delivery dates, with a minimum safety inventory and clear requirements.  

Order fulfillment in supply chain management

Procurement or purchases

In this matter, suppliers are a key actor, as is fostering relationships with them. 

In this sense, you must classify suppliers according to the priority of the raw materials or supplies they provide.

The idea is to achieve cooperative ties that facilitate procedures and allow a win-win relationship between the two.

For example, your company wins if delivery times decrease. The provider does this by ensuring your preference for constant purchases.

Product development and marketing

When the life of the products is short (and that is the trend of many products), it is important to reduce the time to market.

Hence the relevance of knowing the customers that are important to the company. It also involves getting your selection right.

You can not miss, invest in technology for the development and marketing of products.

Returns

Just as delivery is important, so is the prompt response to the return of products.

Timely return decreases the chance that dissatisfaction increases. Even, it is an opportunity to demonstrate the importance that the client has for your company.

Additionally, it provides relevant information to identify and correct weaknesses within the product manufacturing or delivery process.

Conclusions on SCM

The Supply Chain management involves all your business partners that make it possible for the product to reach the consumer.

Since customer satisfaction depends on it, everyone needs to function as allies in win-win deals

Managing the supply chain goes through considerations related to the customer, demand and internal processes.

Check out these interesting articles on management:

It concludes thus, with the study of this important process.

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