Have you ever considered whether your supply chain could become a competitive advantage? When business owners manage their supply chains effectively, their efforts can help increase profitability, improve product quality and enhance customer service. In the wake of the “Great Supply Chain Disruption” of the early 2020s, many business owners are making supply chain management a top priority.
What Is Supply Chain Management?
Your supply chain is the network of people and companies involved in creating and delivering your final product. Getting your product from its point of origin, like a warehouse, to its point of consumption, such as a customer’s doorstep, is the final link in your supply chain.
Before that, many steps must occur. Depending on your business, you may engage with some or all of these players who have important roles in the supply chain:
- Raw materials producers and sellers
- Manufacturing facilities
- Warehousing vendors
- Shipping, distribution and transportation providers
Managing each link of your supply chain is essential. Taking the time to examine your supply chain from start to finish may help you identify improvements that reduce costs, protect your products and deliver shipments on time.
Some companies also include demand planning in their supply chain management. They aim to forecast demand for their products to ensure they have enough without generating a surplus.
Predicting demand, though, requires specialized skills like analyzing data, statistical forecasting and real-time performance monitoring. That’s why many small businesses use technology like enterprise resource planning (ERP) software to help them forecast demand and build an efficient supply chain.
How Does Supply Chain Management Work?
Supply chain management (SCM) includes overseeing and managing a business’s full supply chain, from raw materials and production to shipping and delivery. The primary goals of SCM are to achieve efficiency and reduce costs while delivering a smooth experience for the end user.
The supply chain management process adds centralized oversight over each activity required to create and move goods, including design, material selection, manufacturing, inventory and risk management, and distribution logistics.
What Are the Components of Supply Chain Management?
SCM can be broken down into five main parts: planning, sourcing, manufacturing, delivery and logistics, and returns.
Supply chain managers work to streamline each phase. This helps prevent bottlenecks that can disrupt the supply chain further down the line.
- Planning: This step includes deciding how to integrate all the resources and steps required to meet customer demand. This may include defining and tracking metrics related to company goals, such as customer satisfaction, efficiency and cost.
- Sourcing: In this phase, supply chain managers select providers for manufacturing, storing, receiving orders and delivering final products. Once suppliers are chosen, managers monitor and oversee each relationship.
- Manufacturing: The manufacturing phase includes procuring raw materials, making the product, quality testing, packaging and shipping.
- Delivery and logistics: After manufacturing, supply chain managers develop processes for receiving customer orders and coordinating shipping logistics (e.g. scheduling shipping vendors, scheduling deliveries, tracking shipments, invoicing customers and receiving payments).
- Returns: Creating a process to take back unwanted or defective customer orders.
3 Types of Supply Chain Models
There are several models for supply chain management, each with its pros and cons. The model you use for your company should align with your business’s goals and needs.
1. Flexible Supply Chain Model
Businesses that use this model often receive a flood of orders followed by a slow season. If that sounds familiar—and especially if your business is seasonal—this model may work best for you. This model requires accurate forecasting to ensure you’ll have the raw materials, inventory and labor you need when demand picks up. Ultimately, the flexible supply chain model can help you ramp up quickly during peak sales and then slow down production as needed.
2. Continuous Flow Supply Chain Model
This model is the primary choice for businesses with relatively long-term business models, and for businesses with minimal variation between product offerings and constant demand for their products. Consistent demand makes it safe and efficient to produce large quantities by streamlining production and maintaining a steady flow of inventory. Supply chain managers who use this model must prevent bottlenecks by keeping an eye on each link in their supply chain, especially the availability of raw materials.
3. Fast Chain Supply Chain Model
Constantly trying out new products? If your business sells trendy merchandise with short-term appeal to consumers, you likely need quick production and lighting-fast shipping times. In that case, the fast chain model might be the right one for you.
Supply Chain Logistics
There are many parties involved in a business’s supply chain. Supply chain logistics refer to the coordination between each link. It includes all efforts related to moving, storing, and tracking materials and goods as they move along the supply chain toward their final destination. By successfully managing supply chain logistics, your goods will arrive at each location on time and in good condition.
Effective Supply Chain Management
Skilled supply chain managers build good relationships with suppliers and maintain open lines of communication. They have a collaborative mindset and continuously look for ways to improve, which may include adopting new technologies, improving processes based on employee feedback, and tracking key metrics tied to each link in the supply chain.
Supply Chain Issues
With various players and many moving parts, a complicated supply chain can keep some business owners up at night. Supply chain issues can run the gamut, from shortages of raw materials and warehouse space to missing inventory and shipping delays. And when issues occur at the front end of your supply chain, you may feel those effects all the way down the line.
COVID-19 Supply Chain Disruption
During the COVID-19 pandemic, businesses of all sizes faced supply chain disruptions in nearly every industry.
Many issues began with factory closures and a reduced manufacturing workforce. Shortages in raw materials and keystone product components created ripple effects that choked downstream global supply chains across industries. For instance, thousands of vehicles sat idle awaiting computer chips while customers clamored for new cars and trucks.
Plus, as millions of people stayed home and began ordering more products online rather than visiting retail stores, this exacerbated supply chain disruptions. This shift drastically altered product routing, causing more shipping delays and shortages.
Business owners striving to create sustainable business models cannot neglect their supply chains. By working with a nimble group of suppliers who understand their interconnected roles and who collaborate to keep goods moving, you can build a strong backbone to your business operations.
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