Effective Supply Chain Management and Real-World Applications
Many people do not realize that the supply chain is the unsung hero of our economy. Effective and efficient supply chain management services are critically important in an advanced, global economy that relies on an intricate logistics network.
Understanding Supply Chain and Its Significance
The supply chain is a complex network of individuals and businesses who collaborate and rely on one another to create and deliver a product to the consumer. According to Investopedia, the supply chain begins with raw materials and ends with a product purchased by a consumer.
Creating and managing a supply chain is critical to business operations at every level, with the supply chain ultimately impacting the final product's price and the revenue a business can generate from it.
Defining Supply Chain
According to the National Institute of Standards and Technology, the supply chain is the linked set of processes required to produce and deliver a product to the consumer. The links can include gathering raw materials, designing and developing the product, manufacturing and processing the product and transporting the product from the manufacturer to the retailer, where the consumer can purchase the product.
Importance of Supply Chain in Business Operations
Businesses of all sizes and across all industries must effectively manage the supply chain to provide their products at the best possible price and generate the maximum revenue. According to Indeed, effective supply chain management results in:
- Lower Operating Expenses
- Improved Transportation and Shipping Times
- Reduced Prices for Consumers
- Increased Profits for Businesses
An Overview of Supply Chain Management
Supply chain management, often referred to in the business world as SCM, oversees the supply chain and creates an efficient way for materials and products to move through the various links of the supply chain.
The Concept of Supply Chain Management
Understanding the basics of supply chain management is crucial for any business, regardless of size or industry. The concept of supply chain management requires individuals and businesses to work together to create a cohesive flow from the procurement of raw materials through the design, development and manufacturing stages and into the hands of consumers. The idea is that each link within the chain will effortlessly fit together, ultimately reducing the time and cost associated with developing a product.
Role of Supply Chain Management in Businesses
Each link within the supply chain must remain intact for business operations to move forward smoothly. When there are disruptions in the supply chain, the amount of product available may become inconsistent, which can cause pricing to fluctuate. In addition, it can cause a disruption to supply and demand, forcing consumers to purchase more than is necessary or preventing them from accessing the products they need.
In many respects, the supply chain is the backbone of all business operations, often serving as an undercurrent to the entire economy. Supply chain management, therefore, works to optimize every link in the chain to speed up the process, reduce overhead costs and drive profits.
Key Components and Steps in Supply Chain Management
By identifying the key components and steps in supply chain management, industry insiders and thought leaders can optimize the process and improve overall results for the business.
The Building Blocks of Supply Chain Management
According to Investopedia, there are five key phases in supply chain management:
- Planning in advance to determine the needs and demands of consumers. During the planning stage, supply chain managers must account for raw materials, manufacturing costs and more.
- Sourcing raw materials from suppliers in the industry. Supply chain managers specializing in sourcing often rely on an extensive network of vendors and suppliers to secure materials that meet their needs and fall within expected market pricing. Sourcing experts often rely more heavily on vendors and suppliers who have established records of being reliable and reputable.
- Using raw materials to manufacture new products. Manufacturing is considered by many to be the heart of the supply chain, as it can have a significant impact on both the timeline and cost of the end product.
- Delivering the goods to the targeted consumers. During the delivery phase, the products have to be moved effortlessly from the manufacturing facility to the retailers who will distribute the products. Logistics play a critical role in the delivery phase of the supply chain.
- Returning the products when they do not meet consumers' needs or have been recalled. Sometimes called reverse logistics, returning should be simple and streamlined for the consumer.
Steps Involved in Implementing Supply Chain Management
The supply chain management system should be designed and implemented when a business is established. While the supply chain should be in place for the business, there is always room to optimize and improve supply chain management over time.
According to Indeed, these are the steps required to create and implement a supply chain management strategy:
- Identify the steps in the supply chain and know the process for your business.
- Work to control the variables that can impact the success of the supply chain.
- Continuously monitor the supply chain to prevent disruptions or address any issues that arise quickly.
- Regularly communicate with all vendors and distributors in your supply chain network. This is another preventative measure that can help you avert issues with the supply chain.
Challenges and Solutions in Supply Chain Management
The increasingly complex supply chain as well as ever-advancing technologies are creating new challenges that must be addressed by industry experts and thought leaders. The next generation of supply chain managers will be required to rely on their foundational understanding of the supply chain while looking toward the needs of the future economy.
Common Challenges Faced in Supply Chain Management
The COVID-19 pandemic brought the supply chain to the forefront of everyone's minds, as they were clamoring to get basic supplies and food products into their homes when the world came to a screeching halt. While the major supply chain disruptions that defined the pandemic era have mostly subsided, there are still challenges being faced today by the supply chain.
According to Anvyl, some of the most common supply chain challenges include:
- Material shortages prevent production from starting promptly.
- Lack of transparency within the supply chain prevents businesses from understanding where their products are within the chain.
- Difficulty with accurately forecasting demand and subsequent material availability.
- Disruptions that occur because of supply chain fragmentation.
- Slow processing times at major ports around the world. Labor disputes, climate issues, and inadequate equipment can result in port delays that significantly impact the supply chain.
- Rising transportation costs directly impact the prices of consumer goods and the amount of revenue an organization can generate.
Best Practices to Overcome Supply Chain Challenges
Even the most efficient supply chains are prone to disruptions occasionally, so it's imperative to be aware of the best practices to overcome the most common supply chain challenges.
According to NetSuite, some of the best ways to manage supply chain challenges and disruptions include:
- Being aware of potential risks and disruptions and developing a preventative strategy in advance.
- Creating an alternative plan that can quickly be implemented during a major disruption.
- Harvesting supply chain data in real-time and analyzing the results to create personalized solutions that can quickly be implemented if need be.
- Improving relationships with suppliers and vendors to maintain an open line of communication. These partnerships are critical in effectively maneuvering through challenges when they arise, minimizing disruptions and decreasing downtime.
Evolution and Future of Supply Chain Management
In the age of automation and AI technology, the future of supply chain management looks quite different from the present. Those looking to go into the supply chain management field will want to be aware of its past while knowing what to expect from the future.
Tracing the History of Supply Chain Management
The global supply chain emerged in the aftermath of the Industrial Revolution, fully forming during the first half of the 21st century. However, according to SupplyChain Digital, the term supply chain management wasn't officially coined until the 1980s. As it's known today, the supply chain industry was heavily influenced by the digital revolution and the advent of global technology.
Trends Shaping the Future of Supply Chain Management
The Association for Supply Chain Management notes that some of the most influential trends in supply chain management include:
- Analytics, automation, and AI technology will begin to anchor the supply chain industry.
- Resilient supply chain design will be critical to any supply chain strategy.
- Sustainability will continue to be a key player in overall supply chain design and supply chain management services.
Real-World Applications of Supply Chain Management
Through real-world examples, aspiring supply chain professionals can better understand the impact that they can have on the industry as a whole.
Use Cases of Effective Supply Chain Management
According to Cascade, some examples of effective supply chain management include:
- The vertically-integrated supply chain designed by Starbucks ensures the company is at the forefront of every link and streamlines operations as a whole.
- The strategic sourcing is used by Walmart to provide customers with the products they want in the shortest amount of time.
Impact of Supply Chain Management on Different Industries
Some industries are more heavily dependent upon their supply chain than others. For example, the food industry relies on an optimized supply chain, with grocery stores suffering from some of the most significant supply chain disruptions during the COVID-19 pandemic. Other industries that rely more on their supply chain include automotive, computer technology and fashion.
How Is Supply Chain Management Adapting to Industry 4.0?
As with most industries, supply chain management is currently in the process of understanding Industry 4.0 and adapting accordingly. During the next wave of the digital industrial revolution, AI technology and automation will play a central role in the evolution of the supply chain. Supply chain managers are learning to weave AI technology and smart equipment into the supply chain to streamline the process and reduce costs.
Become a Future-Forward Supply Chain Leader at The University of Memphis Global
At UofM Global, we offer a Bachelor of Business Administration in Supply Chain Management degree program that provides students with a comprehensive foundation in business with an emphasis on supply chain services and management. With coursework covering various topics, including operations, logistics, strategic sourcing, and analytics, students are uniquely prepared to take on a wide range of positions in the supply chain sector.
Request more information about our supply chain management degree program today.
Sources
https://www.sciencedirect.com/science/article/pii/S2351978917308302
https://www.ibm.com/topics/supply-chain-management
Share this article