What Is Supply Chain Management (SCM)?

Supply chain management is the management of the flow of goods and services and includes all
processes that transform raw materials into final products. It involves the active streamlining of a
business's supply-side activities to maximize customer value and gain a competitive advantage in
the marketplace.

What is the main objective of SCM?

The basic objective of supply chain management is to ensure minimum cost and
maximum efficiency in every aspect of handling of raw material, component parts
and finished goods as they move from production centre to the final consumer.

5 Parts of SCM
Planning: To get the best results from SCM, the process usually begins with planning to match
supply with customer and manufacturing demands. Firms must predict what their future needs
will be and act accordingly. This relates to raw materials needed during each stage of
manufacturing, equipment capacity and limitations, and staffing needs along the SCM process.
Large entities often rely on ERP system modules to aggregate information and compile plans.

Sourcing: Efficient SCM processes rely very heavily on strong relationships with suppliers.
Sourcing entails working with vendors to supply the raw materials needed throughout the
manufacturing process. A company may be able to plan and work with a supplier to source
goods in advance. However, different industries will have different sourcing requirements. In
general, SCM sourcing includes ensuring:

 the raw materials meet the manufacturing specification needed for the production of
goods.
 the prices paid for the goods are in line with market expectations.
 the vendor has the flexibility to deliver emergency materials due to unforeseen events.
 the vendor has a proven record of delivering goods on time and in good quality.

Supply chain management is especially critical when manufacturers are working with perishable
goods. When sourcing goods, firms should be mindful of lead time and how well a supplier can
comply with those needs.

Manufacturing: At the heart of the supply chain management process, the company transforms
raw materials by using machinery, labor, or other external forces to make something new. This
final product is the ultimate goal of the manufacturing process, though it is not the final stage of
supply chain management. The manufacturing process may be further divided into sub-tasks

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such as assembly, testing, inspection, or packaging. During the manufacturing process, a firm
must be mindful of waste or other controllable factors that may cause deviations from original
plans. For example, if a company is using more raw materials than planned and sourced for due
to a lack of employee training, the firm must rectify the issue or revisit the earlier stages in SCM.

Delivering: Once products are made and sales are finalized, a company must get the products
into the hands of its customers. The distribution process is often seen as a brand image
contributor, as up until this point, the customer has not yet interacted with the product. In strong
SCM processes, a company has robust logistic capabilities and delivery channels to ensure
timely, safe, and inexpensive delivery of products.

This includes having backup or diversified distribution methods should one method of
transportation temporarily be unusable. For example, how might a company's delivery process be
impacted by record snowfall in distribution center areas?

Returning: The supply chain management process concludes with support for the product and
customer returns. Its bad enough that a customer needs to return a product, and its even worse if
its due to an error on the company's part. This return process is often called reverse logistics, and
the company must ensure it has the capabilities to receive returned products and correctly assign
refunds for returns received. Whether a company is performing a product recall or a customer is
simply not satisfied with the product, the transaction with the customer must be remedied.

Integration

Communicating and collaborating with all parties is a business strategy that eliminates errors and
saves money. Integrating each division with one another combines expertise and builds
teams. Manager duties become more efficient and successful when teams are integrated into the
sequence of processes, as it is easier to monitor overall operations and identify areas for future
improvement.

Operations

Supply chain operations are the backbone of the supply chain process, ensuring your employees
have consistent work. Managers monitor day-to-day operations to ensure that various supply
chain phases stay on track. Many companies today have adopted lean manufacturing strategies,
in which all processes are consistently evaluated to determine which parts of your operations
may become more efficient. By monitoring equipment to ensure efficiency or knowing when to
decrease manpower, the operations team can make major improvements to the supply chain
system.

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Purchasing

Knowing ahead of time what your supply chain process will look like within your company is a
crucial aspect. It is important to know exactly what goods to purchase within your company,
whether it is materials, supplies, tools, or equipment. Hiring qualified purchasing personnel and
ensuring that your employees understand inventory management are critical components of a
strong supply chain. This ensures that your company does not run short on materials, causing
production to be significantly delayed. Having the wrong person in this position can be
detrimental to your business as there is potential to overbuy raw materials and strain your
company’s budget.

Distribution

The final step in the supply chain is when your product is received by customers, either from
store shelf or through direct shipping. For products to reach their final destination, supply chain
distribution must be well planned. Implementing logistics software into your company for
employees to learn or outsourcing a third-party logistics (3PL) company will ensure products are
handled properly so that they may reach customers quickly which is the goal of a distributor.

Some Challenges of SCM:

The supply chain management is centralized on the needs of the customers. It is about giving the
right quantity and the right quality of the product for the right amount of money. All this, in
perfect timing and setting.

Solution: It might seem simply, but on the contrary, it isn’t. Customers have different
preferences and we have to always adjust to the customer’s needs. Being able to provide
customers unique solutions make a difference entirely. Companies that actually excel in this field
are the ones that make an effort to learn and invest in new technologies.

2.Costing

Globally speaking, the costs of raw materials, energy and labor have increased due to economical
constraints. In order for operations to continue production and provide customers with good
quality items at affordable rates, adjustments have to be made to keep operations running.

Solution: The best solution to this issue would be improving your cost control by executing your
plans efficiently through constant monitoring. Through efforts in providing warehouse
efficiency you would be able to do so.

3.Risk Management

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Due to the constant change in the market, coming from a variety of sources such as consumer
demands, political agendas and global sourcing, would cause major issues to the operations.

Solution: Always be prepared with a risk management plan, on how your company will be able
to overcome disruptions during the course of operations. By hiring a logistics software
development company you would be able to manage these issues effectively with less effort on
your end. After all, logistics management is vital to the entire operation.

4.Supplier Relationship

By creating a mutually sound and harmonious relationship with your partners or suppliers, you
will be able to provide your customers with products of high standards in a timely manner. This
also allows you to create opportunities for improvement in terms of performance.

5.Qualified Personnel

Over the years, it has become a challenge to find talent interested and passionate about this line
of work. Personnel hired in this field must have an understanding about the duties and
responsibilities needed.

Solution: Since locating dedicated personnel to work for this field has become increasing hard to
find, their market value will start to rise. Hiring and promoting through in-house staff would be
the most affordable solution at this point.

6.Unforeseen Delays

Procurement of materials and products may be easy, but the delivery may not always be 100%
on time, especially with time differences and a variety of shipping time frames. When items are
sourced from different countries, delays like this are very common.

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