The Basics of Supply Chain Management: An Introduction for Beginners

Supply Chain
April 1, 2024

Most of the time, even businesses with top-class products fail to succeed in the market. The key reason behind most of these failures is the lack of supply chain management.

All kinds of industries and businesses require proper supply chain management for smooth and profitable functioning in the long run. From manufacturing to storage and shipping, each step in the supply chain is essential for maintaining customer satisfaction, growth, revenue, and optimization of inbound and outbound logistics for various businesses.

In this article, we will look at the processes involved in supply chain management, its types, and benefits in detail.

What is supply chain management and why is it important?

For any product to be designed, raw materials are the basic requirement. The companies build a network connecting them to their supplier of raw materials, after which end products are delivered to the customers. A good supply chain requires efficient management and gives the company a competitive advantage over others in the same domain.

All the steps required, from accumulating raw materials to the delivery of the final product and improving customer relations, come under supply chain management. When the number of supply chains for a company is greater than one, it is considered as the supply network. Having the supply chain in place for any business boosts its overall efficiency and profitability.

The seven R’s of supply chain management(SCM) are defined by the Chartered Institute of Logistics and Transport, UK as Getting the Right product, in the right quantity, in the right condition, at the right place, at the right time, to the right customer, at the right price. While the 5S of SCM is defined as

Sort, Set in order, Shine, Standardize, and sustain

5 major steps involved in the process of supply chain management

Having a good supply chain management process in place is important for effective supply chain management.

Given below are the 5 major steps involved in the management of the supply chain:

1. Planning

Matching the demand of the customers with the supply required is essential to guide the manufacturing process and control the inventory. The process involved in this planning is called Supply Chain planning. This helps in cutting down unnecessary costs in areas like warehouse spacing and keeping the raw materials ready for meeting the instant delivery demands.

2. Sourcing

To meet the demands of customers, vendors who can provide relevant goods and services are found. This is called sourcing, which helps in getting supplies and fulfilling demands.

3. Making

Once the raw materials are obtained, it is further transformed into the final products to serve the customer’s demand. It involves the processes of assembling, testing, and packing.

4. Delivering

This is one of the most important processes involved in supply chain management. This involves providing customers with the finished product. It is important to get customers’ feedback also.

5. Returning

Post delivery customer support process involves reverse logistics or returning. Having a clear and direct channel for product return is important to maintain the brand image and value in the market. In this step, the company mostly takes back all the damaged, expired, or low-quality products from their customers and returns the same to the suppliers.

Types of Supply Chain Management

Some of the supply chain models used by companies are:

Fast Supply Chain: Businesses with short life cycles generally use this model to keep up with their sales. It helps them coordinate with the consumer's demand and manufacturing while keeping the deadstock in check. There is a lot of volatility involved in this. Eg: Clothes in Fashion Industry.
Continuous Flow: The businesses selling the same products over years and are mostly stable, use this type of supply chain management to optimize for costs and adjust the processes. Volatility in operations is less here and the set schedule for the supply chain can be maintained.
Flexible and Agile Model: This is for businesses involving seasonal peaks and troughs in their demands. Creating extra stock for the peak season while managing the inventory and reducing waste during the off-season is essential.

Benefits of Supply Chain Management:

Proper supply chain management is essential to keep any business running smoothly. Given below are the top benefits of having good supply chain management:

1. Better inventory management

Proper supply chain management helps ensure the right amount of products to be delivered at the right time. They keep the safety stock available for use and cut down the risks of deadstock by forecasting the demand for products and using it to keep the inventory in check.

2. Cost and Labour optimization

Without a proper strategy in place, it is difficult to fulfill orders for customers and can incur a huge loss for your business. High shipping costs, unoptimized labor, improper inventory storage, and poor geographic location can prove to be detrimental to the business’s growth. Hence, a good SCM ensures minimized costs, and increased returns. It optimizes labor for the business by using automation whenever required.

3. Quality Control and increased customer satisfaction

To sustain any business in the long run, it is essential to have a check on the quality of raw materials procured, the manufacturing process, the distribution vendors, and the overall product quality. This helps in maintaining a consistent level of product quality and guides them in improving the drawbacks and creating a qualified product to be sold to the customers. A good SCM helps in increasing the customer’s satisfaction to a great extent.

4. Use of technology

SCM processes leverage the technology to increase their visibility and gain multiple new opportunities. They are always up-to-date with the latest tools and software increase the efficiency in managing the SCM and streamline the processes.

Conclusion:

The supply chain affects the growth of your business drastically. Having good supply chain management in place can help you scale your business multifold times by streamlining all the processes from the procurement of raw materials to the delivery of products to the customers.

An efficient SCM helps reduce waste, minimize costs, and optimize distribution and labor while keeping the quality under control and increasing customer satisfaction.

To know more about how you can optimize your business through supply chain management, you can contact us at … or mail your query at… and our professionals will get in touch with you shortly.

Updates