A Guide to Supply Chain Management: How and Why It Works

The process allows you to buy practically anything and receive your products faster than ever before. But what exactly is the role of supply chain management in the shopping cycle?

This article will explain how supply chain management works and its importance.

What Is Supply Chain and Logistics Management?

When discussing most commerce-related topics, one of the first questions you may ask is, what is supply chain and logistics management? This process refers to controlling the transformation of raw materials into final products. Without it, you wouldn’t be able to access food, drinks, health products, and other items that let you work, entertain yourself, and travel.

Supply chain management and operations include networks of suppliers who are connected through a centralised platform. Each supplier is a link that moves products along the chain of production. The participants of the process generally include raw material suppliers, manufacturers, and retailers.

Why Is Supply Chain Management Important?

Supply chain logistics and management are essential to the success of most companies. It enables businesses to determine how they roll out their products and what operations they need to perform along the way. A robust supply chain reduces the risk of damaged goods and missed orders.

There are many other advantages of this process.

Lower Costs

A well-developed supply chain can lower expenses by delivering products on time and reducing the risk of material shortages. It helps consistently provide assembly plants with raw materials and safeguard against production shutdowns. If a company lacks certain supplies, it can tap into its supply chain to source the items without postponing the delivery of goods to its customers.

Another way high-quality supply chains reduce costs is by decreasing fixed assets. Organisations appreciate chain managers who can lower the need for vehicles, warehouses, and plants. For example, if they can revamp the network to serve customers from five warehouses rather than 10, the business can avoid buying five expensive buildings.

Improved Agility

Managing the supply chain is pivotal for any enterprise that wants to remain agile. High agility allows organisations to handle unforeseen events with ease by letting them diagnose and solve problems on time. The more agile the business, the better it can respond to global pandemics, natural disasters, and other setbacks.

Optimised Customer Service

An efficient supply chain leads to higher customer satisfaction in many different ways. Primarily, it enables business owners to deliver appropriate quantities of specific products promptly. It also lets clients track orders, resulting in better customer support.

What Are the 5 Elements of Supply Chain Management

We’ve described how supply chain management works and answered the “why is supply chain management important?” question. Now let’s move on to the five basic elements of managing supply chains:

Planning

Supply chain management planning is the first and possibly the most important part of this process. The biggest dilemma here is to decide between manufacturing goods yourself and buying ready-made goods.

If you want to manufacture your products, you’ll need to establish where you’ll source your raw materials. There can be several solutions, including local, international, and regional suppliers.

The same question arises if you purchase ready-made goods. Where will you obtain these products? Who can deliver the necessary quantities?

Sourcing

The second part of managing your supply chain is sourcing. It’s a critical aspect because this is where you can achieve the highest cost savings. Here’s how:

• Choose a high-quality vendor who offers reasonable prices and can deliver the required volume in good time.
• Select experienced suppliers, as they’re familiar with your industry and more likely to meet your requirements.
• Evaluate the assortment of each vendor to figure out if they can steadily offer supplies.

Production

As previously mentioned, the production procedure can involve manufacturing finished goods from raw materials. Alternatively, it can comprise repackaging, bundling, re-kitting, assembling, staging, or dressing.

The process needs to be streamlined to help ensure the desired outcome. If there’s room for improvement in the production process, identify them and address them to increase customer satisfaction. For instance, adding automated manufacturing lines can speed up your production, allowing you to deliver goods faster.

Delivery

Your delivery channels must be stable and robust. They need to be resilient to sudden demand spikes and have effective business continuity practices to overcome bad weather, port congestion, and other logistical problems. Otherwise, your supply chain won’t perform as expected, and your clients may look for another provider who can roll out products sooner.

Returns

Consumers are bound to return some of your products. This can happen for various reasons, such as defects, items of subpar quality, damaged goods, wrong products, and commodities nearing expiry dates. Closely linked to your refund process, the return procedure plays a pivotal role in your customer experience.

How to Evaluate Supply Chain Management

Once your supply chain is in place, you need to evaluate it to ensure consistency. You can ask yourself the following questions to gauge the performance of your processes:

• Does your management team review client expectations for all channels?
• Do you understand all customer service levels, and does your supply chain revolve around them?
• Have you taken preventive and corrective actions to address and safeguard against poor customer satisfaction?
• Does everyone in your supply chain process have access to comprehensive data about your goods?
• Have you implemented procedures that let you take alternative supply chain actions after receiving customer feedback? In other words, do you have a contingency plan in case you need to modify your activities?
• Have you identified the key points for collecting data about your supply chain efforts?

Life Without Efficient Supply Chains Is Hard to Imagine

Supply chain management is one of the most important aspects of worldwide trade. It allows retailers to deliver products quickly and collect feedback about your experience. Moreover, it helps reduce the chances of receiving damaged or wrongly delivered goods. That’s why enterprises that place special emphasis on supply chain activities routinely outperform those that don’t.