Supply Chain Management Process is as much a philosophical approach as it is a body of tools and techniques. Typically, it requires a great deal of interaction and trust between companies to work. For right now, however, we’ll talk more about the role it has in your business customers’ value maximization. We’ll also look at the three major developmental stages.
As well as the unique processes that have brought SCM to the forefront of management’s attention. Including the information revolution, increased competition and globalization in today’s markets, and relationship management. In addition to all its benefits at large and how to use it to an advantage. Imagine not having to upload data externally.
Specifically, on a website like Facebook or on an app like WhatsApp. And yet, being able to share it with friends and other users. That’s where supply chain management systems come in handy. For a supply chain management process to work well, it’s powered by tools, systems, and software under a supply chain. That said, let’s try to elaborate on SCM further.
What Is Supply Chain Management (SCM)?
In simple terms, Supply Chain Management (SCM) is the process of getting products from raw materials to consumers. This includes supply planning, product planning, demand planning, sales, and operations planning, and supply management. To enumerate, according to Investopedia, a supply chain is a network between a company and its suppliers.
Whilst, allowing them to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. In addition, the supply chain also represents the steps it takes to get the product or service from its original state to the customer. There are many reasons why companies develop it.
One of the supply chain management process needs is in order to help them reduce their costs — and, more so, remain competitive in their business landscape.
HAPPY CUSTOMERS = HAPPY BUSINESS = BETTER PERFORMANCE
If a customer is happy with how the returns process is handled, he’s 71% more likely to become a repeat customer.
A smooth return process means an effective supply chain that is well-connected and includes communication along the chain. When a supply chain meets or exceeds customer expectations, it’s through efficiency. The entire company benefits from improved order rates, positive customer sentiment, and reduced company service costs.
Higher Performance = Higher Cost Efficiency = Higher Pressure?
Higher performance is measured by the efficiency of all processes and people along the supply chain to bring goods and services to market. Increased efficiency in a supply chain can put pressure on the team and their skills — because costs and budgets are contained or reduced when it is expected to move the same or greater quantity of product at the same or higher quality level.
A company’s profit improvement is measured by metrics such as working capital turnover and cash conversion performance. Profitable cash management and revenue conversion as business health improve. Flattening the cost curve is often difficult without considering two factors: And using tools that scale appropriately with the value they deliver to your business.
What Is The Supply Chain Management Process?
Realistically, in marketing, the supply chain management process is the active management of all business supply chain activities. In order to maximize their customer value and achieve sustainable competitive advantage. It represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective & efficient ways possible.
And as we said, for an SCM to work well, it requires a well-manned supply chain. Eventually, that’s why a good supply chain management system is a very crucial process for any business to undertake. Simply, because an optimized supply chain results in lower costs and a faster production cycle. But, the whole process involves a series of key business steps.
Steps that are involved to get a product or service to the customer. That said, some of the key steps include moving and transforming raw materials into finished products. Or rather, transporting those products, and distributing them to the end-user. But, the business delivery aspect in the supply chain management process consists of four main parts.
- demand management
- supply management
- product portfolio management
On one hand, it’s worth mentioning that there are some very noble entities that are involved in the process. They include producers, vendors, warehouses, transportation companies, distribution centers, retailers, etc. While, on the other hand, the elements of a supply chain include all the functions that start with receiving an order to meeting the customer’s request.
1. Demand management
Demand management consists of three parts, demand planning, merchandising planning, and promotion planning. Demand planning is the process of forecasting demand to ensure product delivery. Effective demand planning can improve the accuracy of sales forecasts, and adjust inventory levels to meet peaks and troughs in demand.
It can also increase profitability for a particular channel or product. Merchandise planning is a systematic approach to planning, purchasing, and selling merchandise to maximize return on investment (ROI) while ensuring that merchandise is available where, when, at the price, and in the quantity that the market demands.
Trade promotion planning is a marketing technique designed to increase demand for products in retail outlets based on special pricing, showrooms, demonstrations, value-added bonuses, no-obligation gifts, and other promotions. Trade promotions help stimulate short-term consumer demand for products that are normally sold in retail stores.
2. Supply Management
Procurement management consists of five areas: procurement planning, production planning, inventory planning, capacity planning, and sales planning. The supply plan determines how best to meet the requirements created by the demand plan. Its purpose is to balance supply and demand so that the company’s financial and service goals are met.
Production planning corresponds to production and manufacturing modules within an enterprise. Considers resource allocation of people, materials, and capacity. A production/deployment plan consists of the following elements: Vendor management and collaboration.
3. Production Planning
Inventory planning determines the optimal quantity and timing of inventory to meet sales and production needs. Capacity planning determines the production staff and equipment needed to meet product demand. Sales planning and network planning monitor the movement of goods from the vendor or manufacturer to the point of sale.
Distribution management is an umbrella term that refers to processes such as packaging, inventory control, warehousing, supply chain, and logistics.
4. Sales & Operations Planning (S&OP)
Sales and Operations Planning (S&OP) is an integrated monthly business management process that enables leaders to focus on key supply chain drivers such as sales, marketing, demand management, manufacturing, inventory management, and new product introduction.
With financial and business impact in mind, the goal of S&OP is to dynamically connect planning and strategy across the enterprise, empowering leaders to make more informed decisions. Often repeated on a monthly basis, the S&OP enables effective supply chain management and focuses a company’s resources on delivering what customers need while maintaining profitability.
5. Product Portfolio Management
A company must have an exit strategy for a product when it reaches the end of its profitable life or when the product is not selling well. Product Portfolio Management is the process from product idea creation to market launch.
- product presentation
- End of production plan
- Cannibalization plan
- Commercialization and lamp planning
- Contribution margin analysis
- Portfolio management
- Brand, portfolio, and platform planning
- Ensure flexibility to accommodate change
When technology enables efficient planning and rapid response, it makes rescheduling and re-forecasting easier, so when disruptions occur, you stay out of the way. As a result, you save time and money and increase your profitability.
What The Future of Supply Chain Management Process Looks Like
By all means, historical forecasting is used to optimize supply chain planning, but Artificial Intelligence (AI) and Machine Learning (ML) are about to change that forever. AI- and ML-based predictive models transform processes such as demand capture, design and orchestration, and supply planning.
AI begins to drive dynamic pricing and new product launches are based on predictive market intelligence. AI and ML are also powering new models for managing product promotions and responding to supply chain disruptions. AI and ML predictions will play a key role in future supply chain operations and have a transformative impact on other business processes.
Regulatory challenges and security risks
This year, companies will have to raise the bar on privacy and protection protocols as the risk of high-profile hacks that endanger the information of millions of consumers continues. New privacy regulations, such as the General Data Protection Regulation (GDPR) coming into force this year, will also affect business operations.
Tax reform, Brexit, political unrest, oil prices, and resource availability all require action across businesses, including within supply chains. As a result, supply chain planners need advanced modeling capabilities to plan all potential scenarios.
Blockchain and beyond
As a matter of fact, Blockchain Technology is already changing the way trading partner networks work together. Throughout 2019, technology will continue to banish banks, leverage cryptocurrencies and distributed ledgers, and enable better collaboration. Blockchain will also play a role in making collaboration a bigger factor in supply chain planning and execution.
Track and trace, once a movement focused on radio frequency identification (RFID), uses sensors and devices in plants and machines and is being used in new ways this year. Thanks to the Internet of Things (IoT), data permeates supply chains and is used to transform processes when analyzed and leveraged by AI and ML.
A dynamic and connected future
Supply chain managers are constantly looking for new ways to seize opportunities and overcome obstacles as modern supply chains evolve. A connected supply chain planning approach and the use of new technologies bring data together and involve more people in the decision-making process. These trends will play a key role in the supply chain transformation as the future of supply chains emerges.
What Is A Digital Supply Chain And How Does It Succeed?
The digital supply chain is the next generation of supply chain management. Companies use the term “global digital supply chain” or “digitization of the supply chain” to describe the concept that the future of business is deeply rooted in the digital transformation revolution (blockchain, the Internet of Things, advanced robotics, etc.).
You have to recognize that they match. Here are his five ways progressive companies are using blockchain for supply chain success.
Blockchain for smart contracts:
Blockchain unlocks the immense complexity and interconnectivity of global digital supply chains and revolutionizes contract management. This is done by storing all relevant information, including contract terms, on the blockchain ledger. By leveraging smart contracts, which measure all proposed transactions against the stored contract terms, blockchain technology alleviates data redundancy issues and enables trading partners to work together more efficiently in managing contracts.
Blockchain for Sustainable and ethical supply chains:
Once a product (or batch of products) is procured or manufactured, it can be assigned a unique cryptographic identifier. This identifier can be associated with a time-stamped token that tracks the product throughout the supply chain.
All of this information is stored on the blockchain, allowing supply chain managers to ensure that products are produced or sourced in an ethical and sustainable manner while adding operational efficiencies throughout the process of bringing products to market. I can do it.
Some companies are harnessing the power of blockchain to support positive changes in the social environment, including B. The ability to say “thank you” (in the form of blockchain tokens) to the people involved in making the products you purchase.
Blockchain for security:
Supply chain security is a critical issue for businesses as the ownership of valuable assets and sensitive information rapidly changes around the world. Blockchain ledgers are inherently immutable and set up so that everyone involved has an exact copy, making them effectively hack-resistant and changeable without the continued permission of the appropriate parties.
You can’t. The immutable ledger’s built-in protection makes it easier to audit and prevents data corruption. Using a distributed storage system further reduces the risk of cyberattacks.
Today, millions of products move around the world through global supply chain operations. All of these products are tagged with information such as origin, destination, serial number, and manufacturer.
Blockchain reduces the risk of digital supply chains by allowing products to be tracked at every stage of their journey, with dedicated software and multiple planners monitoring millions of products moving through the supply chain.
More Efficient Blockchain:
Blockchain is immutable and transparent, so everyone involved in the digital supply chain can track relevant information about a product and access this information in real time. This greatly improves supply chain efficiency.
For newbies, a supply chain management process is a form of a network between a company and its suppliers to produce and distribute a specific product or service. The entities in the supply chain include producers, vendors, warehouses, transportation companies, distribution centers, and retailers.