Supply Chain Management can be defined as the management of flow of products and services, which begins from the origin of products and ends at the product’s consumption. It also comprises movement and storage of raw materials that are involved in work in progress, inventory and fully furnished goods.
The main objective of supply chain management is to monitor and relate production, distribution, and shipment of products and services. This can be done by companies with a very good and tight hold over internal inventories, production, distribution, internal productions and sales.
- Develops better customer relationship and service.
- Creates better delivery mechanisms for products and services in demand with minimum delay.
- Improvises productivity and business functions.
- Minimizes warehouse and transportation costs.
- Minimizes direct and indirect costs.
- Assists in achieving shipping of right products to the right place at the right time.
- Enhances inventory management, supporting the successful execution of just-in-time stock models.
- Assists companies in adapting to the challenges of globalization, economic upheaval, expanding consumer expectations, and related differences.
- Assists companies in minimizing waste, driving out costs, and achieving efficiencies throughout the supply chain process.
Component 1: Planning
One of the biggest questions procurement teams need to ask is whether the organization plans to manufacture goods themselves or they will buy ready-made goods.
In the event that the company manufactures finished products, the next question that arises is where will raw materials be sourced? Will it be from local, regional, or international suppliers?
This question is also posed if the company is purchasing ready-made products and passing them to the consumer in a finished state. From where will these products be obtained?
Component 2: Sourcing
Following on the heels of the first component is the second step which involves sourcing.
This step is one of the most critical of the entire supply chain as it is at this stage that the biggest cost savings can be achieved.
Choose the right vendor offering the ideal price and who has the capacity to deliver required volumes in a timely fashion and you’ve struck gold.
Select an incompetent supplier and this will affect operations along the entire supply chain.
This process will also include the need to not only find vendors but evaluate and qualify them.
Component 3: Inventory
Having several suppliers so you can secure enough raw materials and or products so you can remain fully stocked up is extremely important. There are numerous lessons to be derived by examining purchasing and supply chain management in 2020.
The ability to carefully manage inventory and ensure that manufacturing schedules are in alignment with consumer demand is as much a skill as it is an art.
Component 4: Production and Transportation
The next important component in supply chain management is production, warehouse, and transportation.
This element of the supply chain takes a look at what is needed to ensure that the organization is producing the correct volume of products and that product quality meets established standards.
This component also factors in where the products will be kept i.e. storage in warehouses as well as transportation from said depots to stores that will retain the products.
Component 5: Return of Goods
These questions are answered in the final component of the supply chain ‘Return of Goods’. Because customer satisfaction is extremely important, it is imperative that there be a clearly defined protocol surrounding the returns process.
The more efficient the return of faulty product processes the higher your customer satisfaction ratings.