What is supply chain management (SCM)?
Supply chain management is the handling of the entire production flow of goods and services, which help a firm transform raw materials into final products delivered to the consumer. Such a network of suppliers’ functions like the links of a chain to help move the product each step in the system - right from the suppliers of raw materials all the way into the hands of the customers.
When used the right way, businesses today can highly benefit from their supply chain systems! By managing their supply chain processes well - companies can significantly cut excess costs, deliver products faster, improve brand image, analyse sales data to manufacture products as per demand, and do much more to beget greater profits!
What are the key components of a supply chain system?
Any traditional supply chain system will have these 5 key components that need to be managed efficiently for businesses to thrive well:
This aspect requires businesses to plan, manage and account for all resources that may be required to meet the customer demand for a company's products or services. When the supply chain is carefully thought out and well-established - a company then determines the metrics that are used to measure whether the supply chain incurs sufficient profits, provides value to customers, meets company goals, and is entirely efficient.
Sourcing and Procurement
In this stage, companies locate the least expensive suppliers who provide the goods and services needed to create the finished product. This includes doing activities like market research, scouting, negotiation, and quality checks. Once the sourcing team has identified suppliers, the procurement team is then responsible for key processes such as budgeting, ordering, managing inventory, communicating with suppliers, etc.
This is where the actual raw materials are transformed into the finished product! Besides manufacturing the desired product - this stage of the supply chain involves performing activities such as accepting raw materials, testing for quality, warehousing activities, preparing packages for shipping, and more.
Delivery and Logistics
Finished goods and services have to move fast through the chain to meet the expectations of customers. This is where firms utilize delivery channels and logistic services to move packages across rail, road, and air to deliver the desired goods and services into the hands of the customers. Activities during this stage generally include processing customer orders, scheduling deliveries, dispatching loads, receiving payments, generating customer invoices etc.
Companies also need to account for creating a network where unwanted or defective products can be returned to the firm. The goal here is to manage the reverse process efficiently and identify opportunities where return requests can be minimized. Managing returns may have an adverse impact as there are extra transportation and inventory carrying costs incurred by the company. These expenses should be well taken into account while managing the company's return policies efficiently.
Managing these components of the supply chain is crucial for companies as it can help them achieve several business objectives. Controlling these processes well can help a firm enhance the quality of their products, improve customer service, and even minimize the risk of lawsuits!
At IDC Technologies - we can get you in touch with the right supply chain managed services that will look after the unique needs of your business and help you churn greater profits.