Some of the most complex systems ever developed manufacture and distribute the goods that keep modern societies running. A global network of supply chains bring us everything from the produce and packaged goods that fill supermarket shelves to the chips that power our smartphones. Supply chains even deliver raw materials for new construction projects.
Nevertheless, major vulnerabilities of the global supply chain system were exposed due to the worldwide COVID-19 health crisis.
Because of the global economic impact since the onset of the COVID-19 epidemic, a significant number of supply networks have been slow and inefficient. Many manufacturing facilities have been operating at less than full capacity due to a lack of raw materials and labor.
Containerships have been backlogged at ports, and there has been a shortage of truckers to transport goods across the country. Because of the chaos, Supply Chain has become a household term, and supply chain management has become a top priority for many businesses.
It will take some time to fully restore global supply lines that have been disrupted by the outbreak. This brief supply chain management guide outlines the key terminology, methods, trends, and issues to make you aware of factors affecting supply chain.
What Is Supply Chain Management?
Supply chain management refers to the oversight and facilitation of the people, processes, information, and technologies involved in the movement of goods and services from manufacturers and producers to users and customers.
The primary goal of supply chain management is to streamline these operations in order to maximize efficiency and cost-effectiveness from beginning to end. This includes everything from manufacturing to product development, as well as the systems and processes that guide these activities.
When implemented correctly, supply chain management enables businesses to eliminate wasteful spending, reduce costs, and improve product and service delivery to customers and end-users. Along with faster delivery times, the risk of errors and delays is reduced.
Supply chain specialists must keep tight control over inventory (including internal and vendor inventories), internal production, distribution, and sales to achieve this.
Supply chain management is, without a doubt, can prove to be a challenging task. It is a complex undertaking to manage the multitude of people, processes, information, and technologies involved in making a supply chain run like a well-oiled machine.
It is a process that requires a high-level, visionary perspective, as well as the ability to drill down into specific processes and systems that are impeding overall operations.
This brief tutorial has been put together to offer a basic understanding of supply chain management’s numerous components. We’ll look at how they work together to make it easier to produce and distribute goods and services to end-users.
The Supply Chain Management Is Divided Into Three Levels
A supply chain is a network of people, organizations, resources, activities, and technologies involved in the manufacture and distribution of a product or service. It begins with delivering raw materials to a manufacturer and ends with delivering the finished product or service to the end-user.
Supply chain management’s role is to monitor each touch point along the way. This includes everything from product development to final customer sales. That means there are several points in the supply chain where companies might add value by increasing efficiency or lose value by increasing expenses without other elements to offset the increased costs.
As a result, supply chain management includes a diverse set of functions, processes, and activities. All of these variables are classified into one of three supply chain management levels. Understanding these three levels makes understanding the scope of supply chain management in general easier:
Strategic planning decisions typically affect the entire organization rather than individual departments or functions. These are typically made by upper management and involve long-term planning.
For example, opening a new manufacturing facility or warehouse is a strategic decision, as is exploring new markets or developing new product lines.
Strategic planning decisions are frequently the first step in designing and defining procedures. Investing in IT systems that can increase efficiency and/or the accuracy, or selecting a location for a new corporate facility, are all examples of how inventory and products are managed over time.
Tactical management decisions define processes, and these decisions are important in risk reduction and cost control. This level prioritizes consumer demand and seeks the best possible value.
Contracting for materials and services, scheduling manufacturing, setting regulations for satisfying regulatory standards, and deciding on storage and logistics are just a few examples.
Only in the context of previously defined strategic and tactical decisions should operational decisions be made. Many businesses make the mistake of starting with operational planning before addressing strategy, tactical planning, and decision-making needs.
Decisions made at the operational level have an impact on a business unit’s, department’s, or individual’s day-to-day operations. They’re made to get the most out of the supply chain in terms of cost savings and general efficiency. In other words, the supply chain is kept active by the activities and decisions made at the operational level.
The following are examples of operational processes:
- Coordinating product and material flow (both incoming and outgoing).
- Inventory management and production operations supervision
- Forecasting on a daily and weekly basis helps the organization make decisions that allow it to fulfill demands.
When planning and decision-making are done efficiently, the supply chain as a whole runs more efficiently, with operational decisions made with knowledge of the broader strategic and tactical decisions.
The Steps Involved In Supply Chain Management
From materials through manufacture and distribution, each significant stage of a product’s journey through the supply chain has its own set of business processes and disciplines. Most processes that were once done manually on paper are now managed by supply chain management software.
Here is a step-by-step explanation of supply chain management.
- Demand Planning: The first step in the supply chain management process is determining which products customers want. The early stages of supply chain planning, which has traditionally been viewed as one of two umbrella categories of SCM, together with supply chain execution, are included in this phase.
Demand planning is sometimes done as part of a structured process known as sales and operations planning (S&OP), which includes gathering data, discussing it, reconciling demand plans with production plans, and obtaining management approval. S&OP is occasionally included in a larger process known as integrated business planning (IBP), which combines the plans of various departments into a single company-wide plan.
- Production planning: Production planning, the company’s next significant phase, determines where and how the products specified in the demand plan will be manufactured.
Advanced planning and scheduling is a more refined version that aims to optimize production resources and make them more responsive to changes in demand. It is usually accomplished with the assistance of specialized software.
- Material requirements planning (MRP): Most firms employ MRP, a 1960s-era technique, to ensure adequate materials and components. Subassemblies, for example, are made available for use in the manufacturing process by taking inventory of what is available.
Gaps must be identified, and the remaining goods must be purchased or made. The bill of materials (BOM), which is a detailed list of all the goods needed to make a product, is the most important document in both MRP and production planning.
- Inventory management: Inventory management refers to a wide range of techniques and formulas for ensuring adequate supply, from raw materials in a manufacturing facility to packaged goods in a retail store, with the least amount of time and effort.
Many inventory management challenges confront manufacturers, many of which involve coordinating demand planning with the inventory at both ends of the manufacturing process.
MRP, for example, can lead to increased inventory, especially when the system is first implemented, and the manufacturer must work to synchronize MRP parameters with existing inventory.
- Procurement: Procurement, also referred to as sourcing, is the process of discovering and managing commodity suppliers, as well as managing those connections and obtaining items at a suitable price. This is on top of all the paperwork and communication (such as sending out bid requests) (such as purchase orders and invoices).
It is a critical component of supply chain management because of how much is bought and sold at all points along the supply chain. Suppliers, producers, distributors, and retailers, for example, all have dedicated procurement teams.
- Logistics: Logistics encompasses the transportation and storage of goods from the delivery of parts and raw materials to manufacturers of processors to the delivery of finished products to stores or direct to consumers.
And even beyond for product servicing, return, and recycling (a process known as reverse logistics). The logistics process is intrinsically tied to inventory management.
Get in touch with CSMI
Our primary goal at CSMI is to provide rapid response technical services in order to maximize system effectiveness. In global environments, our Field Service Representatives (FSRs), Logisticians, and Program Managers establish supply chain activities in support end-user operational requirements and manufacturers of technology products. For more information, contact CSMI today.