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A Guide to Supply Chain Management
Introduction to Supply Chain Management
What is supply chain management? Effective supply chain management (SCM) has to do with organizing, supervising and optimizing the movement of products from the point of origin and suppliers at distant ends of the chain to customers at the other ends of the chain.
The global supply chain is a complicated arrangement of customers, wholesalers, retailers, crowdsourcing and crowdfunding campaigns, distributors, manufacturers and suppliers.
Each aspect of the chain must work smoothly and efficiently to facilitate the timely movement of goods across the globe, to get them where they need to be and by what deadline. Otherwise, manufacturers and distributors may idle workers until vitally needed parts or products finally arrive.
SCM is crucial for businesses to maintain product integrity and ensure they have sufficient components, materials and supplies to support their manufacturing, production, maintenance, resupply or sales goals.
Supply chain management is increasingly important in today’s global economy because it makes the flow of goods operate more efficiently and, therefore, economically.
After all, customers often give little thought to how far away they are situated from the raw materials used to create the products they order. They focus on how quickly they can expect their items to arrive from manufacturers or distributors.
As a supply chain management professional, when you require raw materials from a foreign country or need special products built in distant locations to arrive on time to meet your key performance indicators and address customer demand, you must stay on top of the logistics involved in moving items from point A to point Z.
SCM helps you coordinate the movement of goods through the supply chain more effectively. Supply chain managers are right to worry about potential supply chain disruption. Businesses want to avoid delays caused by a lack of or poor supply chain management because they must avoid disappointing loyal customers.
Poor SCM can lead to reduced product quality, which can, in turn, result in burdensome product recalls fueling a public relations nightmare. And you must pay attention to supply chain management to avoid running out of stock when you need items the most.
Global supply chain challenges can have a significant impact on local businesses. For example, suppose there is terrorism, war or even rumors of war about to break out in the location where your products originate or pass through in the supply chain. In that case, you may experience major delays in receiving them. Labor uprisings can cause problems getting your products in time.
Severe weather conditions and natural disasters can also impact supply chains, hampering your own operations, such as storms that hinder product transportation or fires that destroy crops or crucial parts and supplies.
In extreme cases, a shortage of supplies over a prolonged period can cause factories to shut their doors or companies to go out of business due to an unreliable availability of parts or items to sell.
One foundational principle of supply chain management has to do with adapting the supply chain to the requirements of business customers (such as according to how profitable a particular segment of customers is or how many sales a customer accounts for).
You also must be able to customize your network, such as pivoting quickly from one port to a port on the other side of the country to respond to various contingencies. Another principle addresses supply chain members’ need to share information about product demand, so partners can work together more effectively toward common goals.
To ensure you meet your goals in SCM, you may need to outsource logistics operations and implement modern software and technology solutions to help manage the torrent of supply chain data and automate decision-making processes about ordering and replenishment.
Key Components of Supply Chain Management
What are the key components of supply chain management?
The main components involved in supply chain management include:
- Forecasting and demand planning: You must be able to predict sales and how many products your customers need at any given time (such as on a seasonal basis).
- Supplier management: Effectively locate, monitor and track the suppliers you rely on for parts, items or raw materials.
- Procurement processes: Focus on locating the most suitable suppliers for your business and how you can obtain all necessary items from your external suppliers as you negotiate the most favorable contracts.
- Transportation management: What’s the best approach for arranging delivery of your items? If there are issues at a port, you might have to switch to transportation by air, train or truck.
- Warehouse management: Your warehouse is the site for storing and consolidating items, as you use inventory software to keep precise track of what you have to avoid overstock or running out of stock.
Logistics management fits into the overall supply chain by ensuring that your organization maintains smooth and efficient operations within the supply chain. Good logistics management covers the products’ forward and reverse movement (from purchase orders to deliveries to returns or product recalls).
You’ll know exactly what types and amounts of goods you require and when and where they’re coming from in a process that you fine-tune and adjust as needed to address shifting market conditions as well as any potential disruptions.
Inventory control is critical in supply chain management. It has to do with supervising and maintaining control over goods as they move from their origin to consumers. Efficient inventory control enables you to balance supply and demand better.
If you run out of products or raw materials to create products, you will alienate customers, whether you work in D2C, B2B or sell items to retailers. But you don’t want to hold excess inventory as it may not sell through before the product expiration date.
Advanced Logistics and Supply Chain Strategies
Advanced logistics strategies in supply chain management include harnessing the latest in supply chain management software and computer technology to effectively plan to meet shifting demands while keeping in mind potential bottlenecks in the global supply chain.
For example, to improve supply chain operations, you might line up local suppliers that cost more to provide products on standby in case overseas providers come up short due to labor strikes or natural disasters.
Accordingly, you should deploy data analytics to better forecast demand. It’s wise to use automation to speed up the decision-making process, such as when to order replenishments or to know which items in inventory do not need reordering due to recent reduced demand.
Savvy owners and managers will deploy machine learning and artificial intelligence to help optimize their supply chain and manage their processes better.
You should know that ketteQ provides Supply Chain Execution solutions using our PolymatiQ solver, which delivers AI-driven insights that adapt in real-time to shifting conditions among suppliers on the world stage as well as demand from your customers.
This AI-powered supply chain management solution provides up-to-the-minute information and better visibility into the supply chain so you can better coordinate your efforts to manage assets in the face of disruptions and streamline how you process incoming orders.
Because it’s native to the cloud, this data is easy for your team to access from any location at any time, allowing workers to run automated scenario analysis and better allocate resources for improved operational performance.
Demand Forecasting and Inventory Management
You will want to employ demand forecasting to improve supply chain efficiency. Also known as demand planning, the process relies on historical data and computerized analysis of statistical models, taking into account trends such as market factors, seasonal availability of parts and items and seasonal demand.
Best practices for inventory management to maintain optimal stock levels include using Internet of Things (IoT) devices to know what you have on the shelves and what needs replenishment soon.
Where are specific items located? Which suppliers are your sources for each of these items? Do you know the minimum order quantities they require and what is their lead time for delivery? You’ll also benefit from knowing precisely the wholesale costs offered by each supplier and what discounts you are eligible for.
When you know what types of items people want and when, as supported by the existing data and advanced, AI-assisted analysis, you will gain a competitive edge as your operations run more smoothly and with greater accuracy. You’ll also be more likely to avoid shipping delays and work with better cost efficiencies.
With improved inventory management, your business can leverage just-in-time inventory to reduce costs. You only order raw materials or components in time to match your production schedule.
The goal is to keep a better eye on inventory levels to reduce overstock, which ties up money in supplies rather than being put to better use. Companies can reduce their labor and storage costs with better inventory management.
Risk Management in the Supply Chain
Common risks in supply chain management include unreliable suppliers (because they are poorly managed or are in a region subject to war or terrorism), having to contend with shortages from distant suppliers or even a lack of shipping containers as other companies compete for them. Another risk is criminal hackers infiltrating the supply chain’s computer systems, hampering your visibility into the network.
Your business can conduct effective supply chain risk assessments using advanced software solutions and methodologies to consider debilitating “what-if” scenarios that help you consider all the ramifications of a war, unexpected product recall, work stoppage, clogged ports or other transportation SNAFUs.
You can employ strategies to mitigate supply chain risks and ensure supply chain resilience by creating relationships with multiple, redundant suppliers. Making sure you can find raw materials, parts and equipment in different parts of the world is a good idea in case disaster strikes in one area. It might make sense for you to consider nearshoring suppliers in case global transportation systems slow down.
What if there is a global chip shortage and you cannot finish your products without these vital components? AI and predictive analytics may suggest that you stock up now to avert problems from an unexpected lack of products when you need them the most. Are you prepared for shipping container disruptions that impede the flow of goods across the world?
To avoid your operations grinding to a halt because of malicious hackers, hire IT professionals to audit your system and provide the latest cybersecurity safeguards.
Sustainable Supply Chain Practices
As a supply chain manager whose work supports optimized operations management, you will be tasked with improving supply chain visibility to help maintain sustainable practices.
How can businesses achieve supply chain sustainability?
Sustainability is significant in modern supply chains because it helps your organization reduce its carbon footprint. Consumers now place higher expectations on businesses to act responsibly and ethically. This involves working with suppliers that practice fair labor practices and protect human rights. Even the packaging you opt for affects sustainability, such as using the right-sized cartons made with recycled materials.
Strategies for implementing sustainable practices across the supply chain include beginning with a survey of your business to see what waste you can reduce, such as by using energy more efficiently and cutting down on the waste you generate.
Install an inventory management system to reduce your dead stock that has expired or is obsolete or no longer fashionable. Use data analytics to gain better insight into the total supply chain, such as noting historical data about your orders. Doing so will help you store products closer to the customers who order the most (to reduce fuel usage in shipments).
What are the benefits of a sustainable supply chain for businesses?
You will see improved business efficiency as you do less with more while your carbon footprint diminishes. Companies promote their supply chain sustainability to enhance brand reputation to customers and potential employees who want to make a difference in the world.
Partner With ketteQ for Help Managing Your Supply Chain More Effectively
Effective supply chain planning and data-driven supply management are important for your company’s business efficiency and success. You’ll have better visibility into the supply chain, which is crucial as businesses must quickly adapt to evolving supply chain challenges, such as bottlenecks caused by labor shortages, war or natural disasters.
Harnessing machine learning and artificial intelligence solutions from ketteQ will help you optimize your supply chain management and ensure you consistently please customers with on-time deliveries for each order they place. It’s best to partner with our seasoned experts to improve your supply chain process.
For more insight into how decisions impact supply chain performance or to consult with us about supply chain planning solutions, please contact ketteQ today.
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