Many people inadvertently think of logistics and supply chain as the same, but they are not. Supply chain activities is an all-encompassing endeavour consisting of material handling, the processes of turning raw inputs into final products, logistics of order fulfilment and tracking information within the supply chain. In a nutshell, Supply Chain Management involves managing the production flow of goods and services right from acquiring the input to delivering the final product to consumers.
As you can appreciate, supply chain management involves a wide variety of activities such as supply chain planning, procurement, product lifecycle management, logistics, order management, and crucially seamless integration of information across the entire supply chain. To achieve these goals, modern Supply Chain Management (SCM) systems such as Gartner have moved away from manual and mechanical-centric systems to a digital, automated, data-driven, and integrated supply chain management system covering all aspects of products, finances, and information flow.
What is Supply Chain Management (SCM)?
Supply Chain Management is defined as the handling and control of the production flow of goods and services from sourcing raw materials to the final delivery of products and services to consumers. Every company creates links that move items along the supply chain, whether it’s sourcing materials from suppliers or moving products to the final consumers.
Businesses implement effective SCM to ensure the smooth flow of items and information in the supply chain including the flow of information and goods from third parties. Additionally, businesses use their SCM to attain a competitive advantage and create value for their customers and consumers.
Supply chain management as an endeavour has existed since the onset of trade. Over the years, SCM has grown in sophistication and complexity in response to changing technology and consumer demands. For instance, the advent of mechanised manufacturing during the industrial revolution brought about new and more sophisticated SCM that could allow companies to be more efficient in the production and delivery of products and services.
In the 1960s, the development of highways allowed the movement of goods from intermodal forms of transportation to primarily a trucking mode. This further precipitated the concept of physical distribution of supply chain facilities to make warehousing, materials handling, and importantly, freight transportation more effective.
And in the 1970s, the computerisation of SCM lead to a gradual shift from a paper-based system of data management to a more data-centric supply management system that focuses on data availability and accuracy. The development and widespread use of the internet and personal computer and internet-enabled mobile devices has enabled the integration of SCM with other functions of Enterprise Resource Planning.
On the consumer front, a rise in consumer demand necessitates the development of SCM that can meet the growing demand. An exemplary example of this is the standardisation of parts by Ford Motors, thereby making it easier to churn out cars much faster to meet the rising demand for their products.
In our current times, the business has gone global and so have supply chains. On top of that is the unprecedented technological innovations and rapidly changing customer demands (for instance, the rise of online shopping and the expectations for the prompt delivery of goods). As such, supply chain management and the underpinning strategies should work to meet demand-driven operational models that virtually all businesses operate under.
Moreover, the strategies and actual management are expected to combine processes, technology, and people to actualise the enhanced capabilities needed to deliver goods and services with utmost speed and accuracy.
How does Supply Chain Management Work?
Modern SCM systems follow a fairly simple and intuitive workflow that splits the supply chain management into three categories of products, information, and finances. Every aspect of and/or player in the supply chain falls in one of the workflow categories.
The product flow revolves around the timely production of goods, storage and their delivery in the supply chain. Product flow also entails aspects of planning, sourcing, manufacturing, logistics and delivery, and returning of excess, unwanted, and/or defective products.
For information flow, it involves sending and receiving purchase orders and sales, tracking deliveries, and updating delivery statuses. The information flow is essential for other parts of the SCM system and processes to work reliably. The accurate flow of information ensures all other aspects of the supply chain runs smoothly.
Finally, the finances flow revolves around inventory management, payments, billing, credit card, and any other task that deals with or influence the financial performance of the company.
Benefits of Supply Chain Management
1). Enhanced Financial Flow – With thousands of payments and invoices, cash flow in the supply chain is variable and somewhat unpredictable. With issues such as slow processing occasioned by silo and/or manual processing, poor information flow causing unpredictability in cash flows, costly processes and other issues, financial management in the supply chain can be a daunting task.
Implementing supply chain management can help address issues of cash flow that businesses face.
2). Effective Product Flow – Ideally, every business should strive to have a short time-to-consumer period. The less time it takes for consumers to get the products they order the better the experience. However, businesses should not compromise the quality of products in a bid to get products moving through their value chain faster. Additionally, businesses should seek to get every aspect of their supply chain right – from balancing the supply and demand balance, the mode of shipment and costs, and much more.
Supply chain management enhances a business’ ability to better manage its supply chain, taking into consideration all of these factors.
3). Seamless Information Flow – Unlike the supply chain management doctrines of the past where silos formed the foundation of virtually all supply chain processes and systems in the business realm, today’s business environment calls for better integration of all aspects of SCM. In this regard, implementing industry-leading SCM will allow businesses to integrate information flow in their supply chain.
With modern SCM, businesses are capable of accessing real-time data of their supply chain. Seamless access to this information bolsters a company’s ability to build better customer relations, improve decision making, and helps build stronger relationships with different stakeholders in the supply chain.
4). Better Risk Assessment and Management – Effective SCM allows companies to identify and better manage any risk more effectively. Coupled with predictive analysis of the supply chain, business owners and managers can take corrective steps and develop processes, making it easier to negate losses that arise from supply chain disruptions.
For instance, using real-time data drawn from the supply chain management systems, businesses can predict the demand for their products more accurately, which, in turn, will help the business’ supply chain avoid the dreaded bullwhip effect.
5). Reduces Legal Liabilities – Companies that deploy effective supply chain management have a better understanding of the risk of violating their obligations such as violating global CSR standards. With this in mind, better SCM systems can help companies avoid legal troubles that are expensive to litigate.
Importantly, the superior understanding can help companies be proactive in implementing protective strategies including taking insurance, improving workflow, incorporating new technologies and other steps.
Key Features of an Effective SCM
Supply Chain-Wide Integration – The digital solution should integrate functionalities that span the entire value chain, from integrating suppliers, shippers, OEMs, warehouse facilities, and customers. The SCM system should integrate with other software enterprise applications, emails, help desk, etc.
Collaborative – An effective SCM system enhances collaboration with suppliers, different personnel in the company, and different departments. To enhance this feature, an effective SCM software should provide real-time notification, personalised portals, role-based authorisation, and other features.
Secure – Cyber security is an important element of a robust SCM system. Businesses should deploy SCM systems with fault tolerance, data encryption, network monitoring, virus scanning, and audit trails.
Cloud-Based Access – Part of meeting the collaborative requirement of an effective SCM is to allow authorised personnel to access supply chain data from anywhere. Cloud-based solutions allow supply chain personnel and managers to access necessary information from anywhere at low cost and with negligible risk.
Scalable – The systems deployed as part of the SCM should grow with the business. As a company grows, its systems, software, and processes should meet the needs of existing and new customers and consumers.
Businesses looking to succeed moving into the future need to re-evaluate their supply chain management solutions to meet the demands of consumers who are always connected to the internet. Importantly, enterprises should choose SCM solutions that enhance existing supply chain processes and bolster business growth by freeing up finances that are otherwise held up in the supply chain when using traditional supply chain management solutions.
ASP Microcomputers are the market leader when it comes to the development of customised and packaged solutions. This includes Inventory Management, Portable Barcode Readers, Supply Chain Management, Time and Attendance and Asset Tracking to name but a few.
ASP Microcomputers is here to help you run your operations in a smooth and convenient manner by providing you with the right equipment for your company needs. Contact us so we can sit down and discuss your goals, needs, and business structure. Armed with this information, we can help determine exactly what equipment you need to achieve success.