Every supply chain management process involves designing, planning, executing, controlling, and monitoring of supply chain activities. It helps in building a competitive infrastructure, creating net value, supporting worldwide logistics, bringing demand and supply in synchronization, and measuring performance globally. The supply chain manufacturing process is said to be the unsung hero of the manufacturing sector and it is the foundation that acts a support system for every manufacturing business.
Importance of Supply Chain Management
Every supply chain management process plays a crucial role in running key operations for almost every organization. If the supply chains management process doesn’t run smoothly, the supply chain system can halt at the floor and ultimately lead to a loss in production. The importance of every supply chain management process lies in the fact that it helps in boosting customer service, reducing operational costs, and improving the financial position of an organization. The supply chain management process also has societal roles like ensuring human survival through healthcare and energy supply chain, improving quality of life, and protecting cultural freedom and development. But then, the most important question arises, which is, how can we achieve a successful supply chain management process? Here are the five most essential steps for effective supply chain management.
Steps for a Successful Supply Chain Management Process
The first step in every supply chain management process is planning. To come up with the best possible way to fulfill the end requirement is the first strategic aim of the process. There is a list of key components like warehouse design, plant location and its size, delivery models, and many more that need to be identified. Additionally, transportation cost modeling and warehouse efficiency models are the other components that need to be developed and without which the supply chain management process would be incomplete.
To find out the most reliable raw material suppliers and establish a smooth production process are the two critical steps in every supply chain management process. Companies should assess supplier performance if they are working with a network of suppliers or having inventory management or asset management problems.
This step is a crucial one as a perceivable shape is given to existing plans through manufactured products that are at the final stage of execution. Results are in a way quantified to achieve maximum efficiency.
This step of the supply chain management process is the core responsibility of the managers as they have to ensure the correct delivery of products or services at the right quantity, the right time, and the right location through suitable carriers. Modern IT tools are required at this stage to keep track of delivery channels like warehouse networks, inventory, invoices, and payment receipts.
This is the last step of any supply chain process and it not only involves carrying out quality checks on the returned products or services, but also the management of the inventory. Management of returns should be a measure to improve the value and attain maximum efficiency.
How Does Supply Chain Management (SCM) Work?
The SCM process begins with strategic planning. This involves forecasting demand, setting production targets, and determining the overall supply chain strategy. Organizations need to analyze market trends, historical data, and other factors to estimate future demand accurately.
Once the production targets are set, the next step is sourcing raw materials and components. Organizations need to identify reliable suppliers, negotiate contracts, and establish terms for procurement. Supplier relationships are crucial for ensuring a stable supply of quality materials.
This phase involves converting raw materials into finished products. Efficient production processes are essential to meet demand while minimizing waste and operational costs. Technologies like lean manufacturing and Just-In-Time (JIT) production help optimize this stage.
Logistics encompass the movement of goods, involving transportation, warehousing, and distribution. It’s essential to choose the right transportation modes, routes, and storage facilities to ensure timely and cost-effective delivery.
Communication and data exchange play a vital role in SCM. Timely and accurate information sharing enables organizations to make informed decisions, respond to changes in demand or supply, and coordinate activities across the supply chain.
Continuously monitoring and measuring supply chain performance is crucial for identifying areas of improvement. Key performance indicators (KPIs) such as on-time delivery, inventory turnover, and lead times help assess the efficiency and effectiveness of the supply chain.
Risk and sustainability:
Effective risk management strategies involve identifying potential risks, developing contingency plans, and building resilience in the supply chain. As environmental concerns grow, sustainable practices in SCM become more important. This includes reducing carbon emissions, minimizing waste, and adopting ethical sourcing practices.