The supply chain management process is comprised of a number of steps, which can usually be organized into five categories:
- Planning and forecasting
- Sourcing and procurement
- Handling returns
As demonstrated by the recent food supply chain issues, a failure in one area can lead to disaster. Recent issues highlight the many challenges to supply chain management. Let’s examine the scope of each element and the role each plays in the overall supply chain framework.
The Five Components of a Supply Chain
A well-managed supply chain delivers real-time organizational benefits, ranging from cost reductions to improved supplier and customer relationships. It all starts with monitoring demand, putting secure logistical routes in place, and continually assessing performance to spot flaws or potential bottlenecks.
Supply Chain Planning and Forecasting
Planning is crucial to a successful supply chain. Managers must allocate the right resources for the manufacturing process and ensure that all of the puzzle pieces come together to meet customer demand. Analytical forecasting and contingency planning are used to ensure that the right components are available at exactly the right time, without overinvesting and incurring unnecessary inventory costs.
Sourcing and Procurement
Organizations depend on their suppliers to deliver the appropriate services and materials to produce the end product, but procurement isn’t simply about ordering the correct items. It also includes:
- Quality control
- Standards assessments
- Regulatory compliance
- Back-up supply chains
- Contract management
Once a supply chain manager has a supplier network in place, they need to deal with delivery schedules, inventory management, supplier communications, and account payment approvals.
Production controls vary widely depending on the nature of the business, but the supply chain manager has a key role within the production stage of the supply chain process. The manufacturing responsibilities of the supply chain manager could include organizing raw material deliveries, testing production quality, and implementing recycling programs or returns for excess or substandard materials.
A supply chain manager may also oversee productivity monitoring and production output controls, along with packaging and logistics, for the final shipment of goods to the customer.
The logistics involved in deliveries can encompass numerous factors, such as:
- Coordinating delivery networks
- Managing vehicle fleets or shipping accounts
- Balancing delivery speed with price and quality
- Selecting dispatch and payment methods
- Invoicing customers and reconciling payments
Some supply chains outsource deliveries to a postal service, while others have in-house fleets. Either way, the timeliness and efficiency of a delivery service will impact the overall customer experience.
Returns in a Supply Chain
Returns are a normal element of a supply chain, and occur when customers no longer want the merchandise or when excess or below-standard components are sent back to a supplier. Faulty product returns must be tracked to assess whether a particular problem is recurring or whether items produced with a specific material have a higher frequency of returns than is acceptable.
Monitoring Supply Chain Efficiency
Supply chain management can be extremely complex, but a robust supply chain is integral to organizational reputation, customer satisfaction, and positive supplier collaborations. Every step within a supply chain requires monitoring to evaluate whether the organization is meeting performance metrics and identify concerns or exceptions.
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