Supply chain management is the handling of the entire production flow of a good or service starting from the raw components all the way to delivering the final product to the consumer. A company creates a network of suppliers that move the product along from the suppliers of raw materials to those organizations that deal directly with users (Koberg and Longoni, 2019).
While yesterday’s supply chains were focused on the availability, movement, and cost of physical assets, today’s supply chains are about the management of data, services, and products bundled into solutions. Modern supply chain management systems are about much more than just where and when. Supply chain management affects product and service quality, delivery, costs, customer experience, and ultimately, profitability (Craighead, Ketchen, and Darby, 2020).
According to CIO, there are five components of traditional supply chain management systems:
Plan and manage all resources required to meet customer demand for a company’s product or service. When the supply chain is established, determine metrics to measure whether the supply chain is efficient, effective, delivers value to customers, and meets company goals (Saberi et al. 2019).
Choose suppliers to provide the goods and services needed to create the product. Then, establish processes to monitor and manage supplier relationships. Key processes include: ordering, receiving, managing inventory, and authorizing supplier payments (Tseng, et al. 2019).
Organize the activities required to accept raw materials, manufacture the product, test for quality, a package for shipping, and schedule for delivery.
Coordinate customer orders, schedule deliveries, dispatch loads, invoice customers and receive payments.
Create a network or process to take back defective, excess or unwanted products.
Effective supply chain management systems minimize cost, waste, and time in the production cycle. The industry standard has become a just-in-time supply chain where retail sales automatically signal replenishment orders to manufacturers (Saberi et al. 2019).
When a customer orders more products than the manufacturer can deliver, the buyer can complain about poor service. Through data analysis, manufacturers may be able to anticipate the shortage before the buyer is disappointed.
Seasonal products have a limited shelf life. At the end of the season, these products are typically scrapped or sold at deep discounts. Airlines, hotels, and others with perishable “products” typically adjust prices dynamically to meet demand.
Analytical software tools help to dynamically allocate resources and schedule work based on the sales forecast, actual orders and promised delivery of raw materials. Manufacturers can confirm a product delivery date when the order is placed significantly reducing incorrectly-filled orders (Saberi et al. 2019).
The supply chain is the most obvious “face” of the business for customers and consumers. The better and more effective a company’s supply chain management is, the better it protects its business reputation and long-term sustainability.
IDC’s Simon Ellis in The Path to a Thinking Supply Chain¹ defines what is supply chain management by identifying the five “Cs” of the effective supply chain management of the future:
Connected: Being able to access unstructured data from social media, structured data from the Internet of Things (IoT), and more traditional data sets available through traditional ERP and B2B integration tools.
Collaborative: Improving collaboration with suppliers increasingly means the use of cloud-based commerce networks to enable multi-enterprise collaboration and engagement.
Cyber-aware: The supply chain must harden its systems and protect them from cyber-intrusions and hacks, which should be an enterprise-wide concern.
Cognitively enabled: The AI platform becomes the modern supply chain's control tower by collating, coordinating, and conducting decisions and actions across the chain. Most of the supply chain is automated and self-learning (Koberg and Longoni, 2019).
Comprehensive: Analytics capabilities must be scaled with data in real-time. Insights will be comprehensive and fast. Latency is unacceptable in the supply chain of the future (Min, Zacharia, and Smith, 2019).
Supply chain management is made up of a few components that are very important as well as critical to the system. We shall discuss each of the components in brief.
This is one of the most important stages. Before the beginning of the entire supply chain, it is essential to finalize the strategies and put them into place. Checking the demand for the product or service, checking the viability, costing, profit, manpower, etc., are vital (Tseng, et al. 2019).
The world today is dominated by a continuous flow of information. In order to be successful, it is essential that a business stays abreast with all the latest information about the various aspects of its production (Koberg and Longoni, 2019).
Suppliers play a very crucial role in supply chain management systems. Products and services sold to the end user are created with the help of different sets of raw materials. It is therefore necessary that suitable quality raw materials are procured at cost-effective rates (Tseng, et al. 2019).
For a highly effective supply chain management system it is essential that an inventory is kept and thoroughly maintained. An inventory means the ready list of items, raw materials, and other essentials required for the product or service.
Production is one of the most important aspects of this system. It is only possible when all the other components of the supply chain are in tandem with each other. For the process of production to star,t it is essential that proper planning and supply of goods, as well as the inventory, are well maintained (Tseng, et al. 2019).
Any business, that wants to survive as well as flourish, needs a location that is profitable for the business. Take, for example, a carbonated drink factory set up in an area where water supply is scarce. Water is a basic necessity of such a business.
Transportation is vital in terms of carrying raw materials to the manufacturing unit and delivering the final product to the market. At each stage, timely transportation of goods is mandatory to sustain a smooth business process. Any business which pays attention to this component, and takes good care of it, will benefit from the production and transportation of its goods on time.
Among the various components that create a strong supply chain is a facility for the return of faulty/malfunctioning goods, along with a highly responsive consumer grievance redress unit (Koberg and Longoni, 2019).
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