What Is Supply Chain & Supply Chain Management
How investing in logistics and supply chain management can help boost your business. Get answers to "What is a supply chain?” and “What is supply chain management?”
Running a business in the modern-day world is a complex venture. Without a well-structured supply chain, it’s virtually impossible to succeed, no matter how good your product or service is. Logistics and supply chain management play a huge role in sourcing, storing, producing, and shipping goods and services.
What Is Supply Chain?
We can define the supply chain as a process of creating and selling goods from the early stage of material supplying and manufacturing to the distribution and sale. This chain is the make-or-break point of any business in the modern world.
Businesses usually outsource supply chain services to third-party companies that handle all the necessary operations. Companies offering supply chain services are often called 3PL, 4PL, or 5PL providers.
There are many benefits to outsourcing supply chain services, such as exclusive funding, resourcing, and expertise your business may not have in its current chain operations. The third-party logistics companies have a network of industry-leading managers and work with high-level suppliers. Ultimately, they use more advanced technology for streamlining every supply chain process.
Supply Chain Logistics Explained
Supply chain logistics deal with the storage and shipping of goods across the supply chain.
Comprehensive supply chain logistics start with raw materials, then continue to manufacturing and distribution, and end once the goods or services are delivered to the customer.
What Is Supply Chain and How It Relates to the Global Supply Chain
We live in a world of rapid globalisation. This means products are stored and shipped across countries and continents. The global supply chain is a network that seeks to source and supply products and services worldwide.
There is an essential difference between the global supply chain and the local chain. The former deals with suppliers from other countries, usually for the lower production cost benefits. Local chains optimise suppliers from the same region where the business is located.
Other than a reduced cost of production, global supply chains allow innovation and sharing expertise with a new workforce. However, they also come with a few downsides. This includes longer lead times, exchange rate fluctuations, and communication challenges.
However, regardless of the chain type, business owners rely on supply chain management to lower the overall costs and ensure a fast production cycle.
What Is Supply Chain Management?
Supply chain management (SCM) is a broad term that covers several aspects of managing the overall supply chain process. It includes product development, production, sourcing, logistics, procurement, and more. Without a sturdy management plan, companies can lose customers and the competitive edge in their industry.
The Importance of SCM
Besides making a business more efficient, SCM is also important in mitigating risks and ensuring all operations run smoothly. A supply chain encompasses the manufacturing site, warehouse, transportation, order fulfilment, inventory management, and more. It’s essential to manage all aspects equally well to ensure the chain remains strong.
Every impact that the supply chain receives can spread across the whole business. Two of the most important aspects include return on investment (ROI) and customer satisfaction. The chain management helps keep those two in order.
So unless you optimise your SCM right from the start, you risk breaking the chain relatively fast.
If you wondered, “What is supply chain management?” before, things should be much clearer now. It’s time to dive deeper and see how this broad term connects to the logistics industry.
Supply Chain Management in Logistics Industry
The importance of supply chain management in the logistics industry is worth a mention. Logistics and supply chain management go hand in hand. Any company dealing with logistics needs a well-developed plan to organise how they will store and transport goods.
SCM and logistics are often used as interchangeable terms.
But how are logistics and supply chain management different?
Differences Between Logistics and Supply Chain Management
The SCM deals with high-level processes that include sourcing and purchasing raw materials and creating goods. It uses logistics to deliver the products to the customer, but its primary goal is to boost the competitive edge.
The critical difference between logistics and supply chain management is that the former refers to the integration and maintenance of goods in a business, whereas the latter coordinates and manages the organisation’s supply chain in general.
The chain management is more comprehensive and covers all partner coordination aspects. Supply chain management works on three levels – strategic, tactical, and operational.
Strategic Supply Chain Management and Logistics Approach
The strategic supply chain management and logistics approach promote the concept that every product or service reaching the end-user results from a combined effort of a series of organisations inside the supply chain.
Strategic supply chain management and logistics deal with high-level strategic decisions relevant to the whole business. That includes product development, manufacturing, customers, vendors, and logistics.
Not long ago, organisations primarily focused on what was going on inside their business exclusively. But thanks to the development of the strategic supply chain and management and logistics, they learned that the whole chain is crucial for increasing customer value and reaching a competitive advantage.
Strategic supply chain management decisions are required in distribution centres, warehouses, and in determining transportation modes. The company can make strategic decisions to use third-party logistics companies to handle their logistics and supply chain management processes.
What Future for Supply Chains?
Companies will undoubtedly continue to outsource their strategic supply chain management processes in the future. They will also start looking at how digital transformation can optimise the whole system. For example, tracking orders and shipments can be fully digitalised.
Digital supply chains will become the new normal, with control towers and platforms overseeing every little detail of the machinery. Data collection will become more straightforward and is likely to reshape the logistics industry throughout.
What Is Supply Chain Management – Explained
The SCM plays a crucial role in how well a business handles its goods and directly impacts the return on investment and customer satisfaction. This article answered questions such as “What is the supply chain,” “What is supply chain management,” and touched on essential aspects regarding supply chain management in the logistics industry. To conclude, the supply chain process is complex and consists of numerous organisations. If you’re looking to streamline your business and give it a competitive advantage, you want to create a robust supply chain management system.
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