What is supply chain management?
Supply chain management (SCM) is all about managing the way in which goods and services flow through the whole production process, all the way from being raw materials to finished goods that reach the customers. The process involves shipping, production, as well as the distribution of products, goods, and services.
To pull off supply chain management right, you need suppliers and manufacturers to be as efficient as possible. All the activities need to be streamlined so that costs are kept down, there aren’t any shortages, and the business can stay competitive. Streamlining a business's supply-side activities makes it possible for the business to maximize the value that they provide to their customers by delivering products faster and without shortages.
Effective supply chain management can also help your business minimize risk, reducing the need for expensive recalls and the possibility of having to deal with lawsuits.
Supply chain management is essentially an effort by suppliers to create and implement the most efficient, effective, and economical supply chains possible. The supply chain as a whole includes everything from production to product development to the information systems that are required to direct these undertakings. SCM aims to centrally control or link the production, shipment, and distribution of the goods. It involves tightly controlling the internal inventories, internal production, distribution, sales, as well as the inventories of company vendors.
What are the 5 basic steps of supply chain management?
The 5 basic steps or components of supply chain management are:
This is critical to manage inventory and manufacturing processes. Organizations always attempt to match the supply with the aggregate demand by looking at data and creating an action plan. It is also important for them to keep an eye on demand variations across the value chain so as to not have to deal with the bullwhip effect.
This involves identifying vendors who can procure goods and services to meet the planned or actual demand in the most economical and efficient way. Ther eare specific standards that the supplier needs to meet so that the purchasing company can be assured that they are receiving quality goods from the vendor. If there are perishable products being sourced, it is necessary to have a minimum supplier’s lead time which will support a minimal inventory approach. But with the non-perishable products, the supplier’s lead time should be less than the number of days by which inventory would reach zero.
This involves performing all the activities that are required to transform the raw materials in the finished product. Tasks like assembling, testing, and packing are carried out at this stage of supply chain management.
This involves using various means of transportation like road, rail, and air to get the products to reach customers at the right time, according to their demand. This step of supply chain management has a major impact on the firm’s brand image.
This post-delivery support process involves taking care of products that are being returned. This is also known as Reverse Logistics. Doing this right helps improve the company’s relationship with their customers. It makes them come off as a company that cares about its customers and not like one that is just trying to make money off them.
What are the 6 types of supply chain management?
The Continuous Flow Model
This supply chain model is built for efficiency. It’s all about providing stability in high-volume environments. It’s a classic supply chain model and is most appropriate for manufacturers who produce the same product on a repetitive basis, without any substantial design changes or alterations.
The continuous flow model is great for commodity manufacturing. The high level of efficiency that it provides allows for lower prices on the final product.
The Fast Chain Model
This supply chain model is all about responsiveness. It’s a great fit for manufacturers who change their product line on a frequent basis. It’s best for manufacturing trendy products that see great demand at one point and then just lose their demand soon.
To put it simply, the fast chain model is meant for manufacturers who want to flood the market before a trend cycle ends. It’s all about gaining the first mover advantage.
The Efficient Chain Model
This model is meant for hypercompetitive industries in which end-to-end efficiency is of critical importance. It lays great emphasis on production forecasting to properly burden and sweat machinery assets.
It also focuses quite a bit on commodity and raw material prices.
The Agile Model
The agile supply chain model is a good fit for manufacturers that deal in specialty items. It’s fine tuned for particularly small product batches where less automation and more expertise is required. The additional valued added by using this supply chain model makes it possible for the businesses using it to charge higher prices.
Businesses using the agile model can increase their production volumes. But past a certain threshold, they just can’t match the level of efficiency that comes with using the efficient chain model.
The Custom-Configured Model
The custom-configured or custom-configuration model concentrates on providing custom setups during production and assembly. Generally, this setup time occurs at the start of a longer production and assembly run process. It is a higher-touch model that could bring shorter turnaround times and smaller product batches. You could consider it to be a combination of the agile and continuous flow models.
The Flexible Model
This approach tries to be an ‘all-weather’ approach of sorts. It can scale up for high demand volumes during a peak season, and even cut down when there are stretches of low-to-no demand. To use this model, businesses need the right tools as well as a broad supplier network or a team with a particularly a broad knowledge base.