Understanding Supply Chain Management
APICS Dictionary defines supply chain management as the “design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.” Supply chain management is the management of all the activities in a supply chain be it sourcing, procurement, storage of raw materials, production planning and scheduling, forward and reverse logistics, warehousing, inventory, finished goods, order processing, customer service or returns management.
Supply chain management facilitates the management of the complex and dynamic supply and demand networks by linking all the stakeholders in a supply chain namely vendors, carriers, manufacturers, wholesalers, distributors, retailers, third party companies, information systems providers and customers. In other words, it is the art of providing the right product, at the right time, at the right place and at the right cost to the customer.
Supply chain management is comprised of five basic components and they are:
Plan
The first step is to plan an effective strategy to manage and monitor the flow of raw materials and other resources through the supply chain. Effective planning helps to have a supply chain solution that is not only responsive but also fully prepared for contingencies. This leads to reduced costs, prompt delivery, quality products and high value to customers.
Source
The next component is sourcing which involves analyzing the competencies of each supplier to select a good one who can deliver goods and services to create the products. As part of it, supply chain managers develop policies for pricing, delivery and payment with each supplier and then monitor their activities.
Manufacture
At first the supply chain managers schedule activities for manufacturing, testing, packaging and shipping. Then they execute it by coordinating the activities of each stakeholder in the supply chain.
Deliver
On time delivery of products requires synchronization of various activities such as logistics, customer orders, warehousing, invoicing and so on. Supply chain managers make sure to put in place an effective delivery process so that right product reaches the right customer.
Return
Returns management is the most difficult part of the supply chain. Defective and excess products would always exist in a supply chain. Supply chain managers must set up an effective system to manage the returned and defective products from customers and retailers. This translates into customer loyalty and new business opportunities.
In today’s business atmosphere, supply chain management has a very important role to play as it facilitates faster product availability in the market thereby ensuring increased company revenue and enhanced customer satisfaction.
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