Supply chain management refers to the whole process of managing the flow of goods. From sourcing raw materials to the delivery of those products, it encompasses all the essential steps that follow. An effective supply chain is essential to reduce costs and improve customer satisfaction. But how supply chain management works and why does it matter? Continue reading the blog to find out.
What is Supply Chain Management?
The supply chain management includes all parties such as the vendors, logistics providers, warehouses and others. These parties collaborate to cater to various operations and activities that lead to order fulfillment. This way supply chain management helps in unifying a business’s production process and leads to increased efficiency.
The main elements of supply chain management include collaboration, operations, purchasing and final distribution. To improve your business’s supply chain, you need to be aware of these elements.
- Collaboration: Effective collaboration ensures seamless communication and coordination among the suppliers, manufacturers and distributors.
- Operations: Efficient operations involve efficient management of resources and quality control to meet the demand.
- Purchasing: Purchasing entails that you are sourcing the right quality materials and personnel for managing operations.
- Final Distribution: Final distribution ensures accurate and timely delivery of finished goods to the end customer.
Why Does Supply Chain Matter?
The supply chain matters as it helps businesses keep their goods moving and get them delivered to the right place and time. We all depend on the supply chain for the right and timely delivery of our necessities too. Imagine if any aspect of the supply chain disrupts, it can lead to consumer dissatisfaction and ultimately affect businesses.
An efficient supply chain management can do wonders for your business by optimizing operations. Here is a list of the key advantages it can serve to your business:
- Shipping Optimization
- Reduced Overhead Costs
- Better Production Management
- Risk Mitigation
- Enhanced Visibility
- A More Agile Business
How Does Supply Chain Management Work?
The supply chain works based on three categories: goods, information and finances. All these aspects should be managed properly for efficient supply chain management.
- The movement of goods indicate that they are stored, managed and delivered properly with quality checks
- The information flow indicates that the goods are being received and sent smoothly and accurately.
- Lastly, the finances flow includes all operations relating to payments, billing, credit terms and inventory management.
Functions of Supply Chain Management
Having understood the main aspects and working of the supply chain, let us enlist the basic functions of supply chain management. These include planning, sourcing, production, inventory management and final distribution.
1. Planning The Goals
The first and foremost aspect of efficient supply chain management is planning and setting out the goals. This is done by forecasting demand, which helps you to balance the supply chain by aligning your operations accordingly. Once you know the demand or its changes, you can easily formulate your strategies to achieve the desired goals.
2. Sourcing The Right Materials and Personnel
Sourcing the right raw materials and personnel is essential to ensure that they do not cause any loss to you in future. Suppose you hired a logistics manager with less industry experience for the management of goods. A person with less knowledge can directly hamper your supply chain. So, remember to choose the right ones.
3. Production Management
Production management involves overseeing all processes related to the manufacturing of finished goods, from materials to final production. Processes like scheduling mass production of goods, product development, cost control, and quality checks are performed.
4. Inventory Management
This function involves efficient handling and storing of goods throughout the supply chain. The inventory management ensures that goods are safe and available when needed. It involves complete tracking of the inventory from manufacturers to warehouses and till the final delivery.
5. Logistics and Distribution
Logistics and distribution involve the transportation and delivery of goods from suppliers to the final consumers. This function of the supply chain ensures that goods are transported safely, on time and in a cost-effective manner. Logistics is a bigger aspect that also involves supply chain activities like warehousing, transportation and inventory management.
Conclusion
In this blog we understood how supply chain management works, its main functions and why does it matter. Supply chain management is critical for businesses these days to stand effectively in the ever-growing competitive market. It is not just handling of goods but involves much more that helps businesses acquire efficiency in the long run. Partnering with a reliable 3PL service provider can significantly enhance these operations by streamlining logistics and reducing costs.