What is Supply Chain Management?
Various individuals or businesses are responsible for making us available every consumable item, either produced in farm or in a factory. This takes a great deal of planning, demand forecasting, procurement, and logistical expertise to move those items to retail stores. Supply Chan Management involves a series of key activities and processes that must be completed in an efficient way including quality control, minimum fuel usage, minimum cost and timely manner. Otherwise, product will not be available as desired and when needed by consumers like you.
Material Flows in Supply Chains
Effective flow of products from the point of origin to the point of consumption defines the supply chain. A two-way flow of information and transaction data between the supply chain participants creates visibility of demand and fast detection of problems. Both are needed by supply chain managers to make good decisions regarding what to buy, make, and deliver.
In their roles as suppliers or retailers, they want to get paid for their products and services as soon as possible and with minimal hassle. Sometimes, it is also necessary to move products back through the supply chain for returns, repairs, recycling, or disposal.
Because of all the processes that have to take place at different types of participating companies, each company needs supply chain managers to help improve their flows of product, information, and money.
Supply chain activities aren’t the responsibility of one person or one company. Multiple people need to be actively involved in a number of different processes to make it work.
While all the participants are responsible for something, they don’t do whatever they want. Each person has a role – producers (farms or component manufacturers), processing facilities or assembly lines, transporters, warehouses, wholesaler, retailers and consumers – and must perform well at their assigned duties. They also need a manager to develop a plan, put people in the right positions, and monitor success.
Each supply chain player must understand his or her role, develop winning strategies, and collaborate with their supply chain teammates. By doing so, the SCM team can flawlessly execute the following processes:
- Planning – the plan process seeks to create effective long- and short-range supply chain strategies. From the design of the supply chain network to the prediction of customer demand, supply chain leaders need to develop integrated supply chain strategies.
- Procurement – the buy process focuses on the purchase of required raw materials, components, and goods. As a consumer, you’re pretty familiar with buying stuff!
- Production – the make process involves the manufacture, conversion, or assembly of materials into finished goods or parts for other products. Supply chain managers provide production support and ensure that key materials are available when needed.
- Distribution – the move process manages the logistical flow of goods across the supply chain. Transportation companies, third party logistics firms, and others ensure that goods are flowing quickly and safely toward the point of demand.
- Customer Interface – the demand process revolves around all the issues that are related to planning customer interactions, satisfying their needs, and fulfilling orders perfectly.
Principles of SCM
These principles highlight the need for supply chain leaders to focus on the customer. They also stress the importance of coordinating activities (demand planning, sourcing, assembly, delivery, and information sharing) within and across organizations.
- Consumer, Market Segment: Segment customers based on the service needs of distinct groups and adapt the supply chain to serve these segments profitably.
- Logistics Network: Customize the logistics network to the service requirements and profitability of customer segments.
- Market Dynamics: Listen to market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation.
- Product Differentiation and Customization: Differentiate product closer to the customer and speed conversation across the supply chain.
- Cost Efficiency: Manage sources of supply strategically to reduce the total cost of owning materials and services.
- Technology Adoption: Develop a supply chain-wide technology strategy that supports multiple levels of decision making and gives clear view of the flow of products, services, and information.
- Performance Tracking: Adopt channel-spanning performance measures to gauge collective success in reaching the end-user effectively and efficiently.
Conventional Supply Chains embrace ‘Digital’ upgrade
Sectors like retail, transportation, banking, food, consumer goods and communications have seen a facelift due to three factors, namely advent of digital technologies coupled with smartphone penetration and affordable data services.
Consumer experience and expectations are at an all time high, including access, quality and speed of services. Consumers are becoming more demanding. Various surveys indicate customer service should be a company’s top priority. Businesses must therefore put their best resources to create winning customer experiences that retains customers and brings in new customers. This necessitates redesigning of entire supply chain operations.
Most organisations witness exponential growth in demand, and supply chains need to become much faster and precise. Conventional methods of managing businesses will be left behind. It is critical to adopt digital tools spanning entire business processes – to obtain real-time transaction data, shorten replenishment cycle times, optimise deliveries and predict future demand.
Market leaders bring together the right combination of logistics and e-commerce expertise required to drive breakthrough innovation. This innovation assures customer experiences are taken to a new height.
Supply chain transformation in action
Some evidences of the digital consumer experience:
- Buying eyewear online – including testing and selection of lens.
- Medical supplies are available online, with assurance of delivery withing 48 hours.
By rethinking its supply chain, companies have enabled product selection and marketing on a truly individual level. Artificial Intelligence provides dynamic product insights to suit individual customers. Advanced cloud based applications for areas such as showcasing products, customer service, procurement, inventory, order management, manufacturing, and supply chain. The cloud has made it easier for businesses to interact with a global supply chain in an economical way – essential as it ramps up production with global brands.
But it’s not only consumer brands that are enhancing the customer experience through supply chain transformation. Take case of a MNC logistics company that has embraced automation to deliver a stronger overall customer experience. The company has completely automated the order booking, scheduling of transportation and delivery management; in the process enhancing transparency and speed of service for customers. The company has also used advanced, data-driven cloud applications to better visualise its supply chain, logistics, and trade information in real-time. This has helped it optimise resourcing and reduce the number of empty containers.
Other organisations are looking at the power of supply chain transformation to play an integral role in the move to digital. Their strategy is to transform the organization to respond the imperatives of digital and industry 4.0. A team of specialists is engaged to help modernise its supply chain and thereby enhance the customer experience. These strategy centres on overhauling existing IT systems across key business units including management, purchasing, production process, transportation, distribution, sales, and after sales services.
Supply chains in the digital age
These companies are disrupting the supply chain to drive innovation. They are doing this by using data to better join up their back- and front-offices, influence product and service development, enable hyper-personalisation and drive efficiency.
Companies that integrate digital technologies into their supply chain can quickly improve service levels while cutting cost by 25-35 percent. Agile supply chain operations are, therefore, critically important to ensuring front-office innovations are a success – but most companies are not yet rebuilding their back-office functions at a fast-enough rate. According to published research, over 50 percent of enterprises say it takes months or even years for their support business functions to make changes in response to evolving business needs. The reasons given for this include siloed internal processes, which approximately 80 percent of organisations cited as barriers preventing them from achieving their business goals.
Successful companies build a short-term roadmap with concrete initiatives that will start delivering benefits quickly and provide flexibility in reaching long-term supply chain goals.
We believe the cloud roadmap, with Software-as-a-Service for supply chain operations as the core, is answer. The cloud brings together the disparate data, systems and partners that comprise supply chains and facilitates their integration across the enterprise. As such, the cloud provides the basis through which back-office operations can be made agile rapidly, and with minimal disruption to the business.
When you start adding AI and IoT led business applications to the supply chain operations, this transform businesses into intelligent enterprise further fuelling innovation and customer experience differentiation.
Begin by debating questions at your next board meeting: What will business in Asia look like in five years, and what supply chain capabilities you need? Organisations that are leading the way in the adoption of cloud and data technologies are making ecommerce faster and more personalised than ever. Other innovators are using data from manufacturing and post-sales to iteratively improve their services and create additional revenue streams through new business models. The supply chain is a fundamental driver of success in the digital age and all organisations need to act now by looking at how their own supply chain is set up and whether it is still fit for purpose.