Why important?
How does it work?
Benefits of supply chain management
Supply chain management process
Best practices by o9 solutions
Supply Chain Management software by o9 Solutions
Supply chain management definition:
Supply chain management is the coordination, integration and optimisation of all activities involved in the production, procurement, conversion, and distribution of goods and services. This involves materials, finances and the transferal of information from the supplier to the manufacturer onto the wholesaler, retailer and ultimately the end consumer. View wikipedia
Supply chain management explained:
The meaning of supply chain management lies in the coordination of logistics to a certain point — for example, the transport of goods to a factory. And so each of these factors can be optimised: operational management, order placement, retention of stock at suppliers, information processing, issuing of permits, staffing needs, financing and planning.
Why is supply chain management (SCM) important?
Modern supply chains help improve living standards by enabling consumers to buy essential products at lower costs. An effective supply chain streamlines the process of getting products to market, and ultimately to consumers.
Other reasons behind the importance of chain management include:
- Basic life necessities. Through supply chain management, individuals access necessities such as food and clothing, as well as life-saving medicines and health care products.
- Power and light. The energy supply chain uses management principles to ensure customers have access to energy.
- Infrastructure. Interstate highway systems, railroads, ports, and airports facilitate the exchange of goods between businesses and consumers.
When considering why supply chain management is important, it’s also worth noting the potential repercussions of an ineffective supply chain. For example, a lack of raw materials can result in a manufacturer not having the resources to create a product that is in high demand. And a scarcity of that product can result in abrupt price hikes, which directly impacts consumers.
How does supply chain management work?
Supply chain management (SCM) represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible. Everything from production to product development to information systems is considered.
Typically, SCM attempts to centrally control or link the production, shipment, and distribution of a product. By managing the supply chain, companies can cut excess costs and deliver products to the consumer faster. This is done by keeping tighter control of internal inventories, production, distribution, sales, and the inventories of company vendors.
In simple terms, the overall workflow of supply chain management is split into three different categories: product, information, and finances. Every business that is a part of the supply chain works under one of these categories. Here’s a little more about each one:
1.
The product flow includes the timely formation, storage, and delivery of products along the supply chain. It also involves conducting quality assurance at each product location.2.
The information flow consists of sending and receiving sales and purchase orders, as well as updating delivery statuses. It’s essential that this workflow runs smoothly because all the other workflows depend on the accuracy of the information that is sent throughout the supply chain.3.
The financial flow deals with payments, inventory management, billing, credit terms, and other related workflows.
Benefits of supply chain management
Because the term encompasses such a wide range of operations, the benefits of supply chain management are extensive. Here are eleven main positive outcomes:
1. Increased Productivity
Businesses can better predict demand and cater to it when their supply chain operations are strategically planned and executed. This improves a company’s ability to adapt to disruptions, changing markets, and shifting industry trends. Manufacturing and shipping delays can be avoided if supply chain leaders invest in making real-time data available and automating supply chain processes.
2. Reduced Cost
One of the most significant benefits of effective supply chain management is reducing costs and increasing profits within your company. This is because SCM enables manufacturers to assess their current manufacturing processes, identify flaws and inefficiencies, and determine the best course of action to address these issues. Your production will run more smoothly as your processes improve, allowing you to produce more goods for less money.
3. Customer Satisfaction
Effective supply chain management helps businesses to establish a solid market reputation and improves a business’s ability to respond to customer needs. This not just attracts new customers, but also influences their brand loyalty.
4. Better Risk Management
Analysing both big-picture and granular supply chain data can expose potential risks, allowing businesses to devise contingency plans in advance of unforeseen events. Companies can avoid negative impacts by taking proactive action instead of reacting to supply chain disruptions, quality control issues, or other concerns as they arise. Companies can also make their operations leaner by monitoring risks, understanding them and taking action to mitigate them.
5. Good Supplier Relations
Many SCM systems include tools for comparing supplier costs and customer service. These assist managers in making informed supplier selections and strengthening relations. Businesses can determine whether a vendor is a good fit by learning how much they charge, how they support their products, and how they deliver.
6. Consistent Quality Assurance
One of the key benefits of supply chain management is that it incorporates standardised quality techniques to improve operations. This is especially important for manufacturers who have moved to different countries (with varied product standards) to save money.
7. Continuous Cash Flow
Supply chain management is a key facet of business planning. Companies must ensure that payments aren’t going out faster than resources are coming in, and supply chain management strategies can assist businesses in addressing cash flow issues by allowing them to evaluate their current processes, identify the weakest links, and determine the best solutions to address the problems.
8. Controlled Inventory Management
Overstocking results in the wreckage of unused materials, whereas understocking results in the failure to fulfil demand, resulting in a loss of business and revenue. The right supply chain management system ensures that your company has a well-organised warehouse and inventory control system in place to reduce holding costs on excess inventory while still allowing you to meet your customers’ needs.
9. Shipping Optimization
Shipping optimization has become a top priority for supply chain executives as a result of rising costs. Recognizing the most efficient shipping methods for small packages, large bulk orders, and other shipping scenarios helps companies deliver orders to customers faster while keeping costs minimum. Not only do cost savings help the company’s bottom line, but those savings can also be passed on to customers, resulting in higher levels of customer satisfaction overall.
10. Sustainability
Measuring supply chains' impact on the environment, human rights and anti-corruption policies is becoming increasingly important for organisations, their suppliers, partners and customers. Software that can integrate sustainable choices into supply-chain management can deliver value chain opportunities and significant competitive advantages for organisations.
11. Strategy, Knowledge & Insight
The final key outcome is the knowledge and insight that can inform strategic decision making. Managing supply chains and delivering of the previous 10 outcomes can only be successfully achieved through analysis, process improvement and maturity growth. The insight gained from making supply chains become better and faster provides the knowledge that underpins strategic plans for organisations to develop and evolve.
Supply chain management process
The supply chain management process comprises five components essential to creating and delivering quality products and services on time and within established budgets. SCM helps enterprises establish clear blueprints for procuring resources, building and delivering final products, and maintaining positive relationships with consumers.
The main five steps of the SCM process are:
1.
Plan: Companies must first develop a plan to ensure inventory is available for all manufacturing processes. A key issue to be aware of here is demand variation, which can impact what resources are available to your enterprise. Most companies use an analytical tool, such as material requirement planning software, to help predict supply and determine the required raw materials.2.
Source: Companies must identify vendors who can supply required materials on budget and in the most efficient way possible. Here, the focus is on finding the right resources and ensuring they will arrive in the correct time frame, all without losing any revenue during the process.3.
Make: In developing the final product for the customer, companies must be sure to follow requirements as closely as possible. In this phase, companies assemble, test, and pack products, and then improve the production operation process based on feedback from the customer. Products might go through numerous iterations before the final version is delivered.4.
Deliver: In delivering final products to customers, companies focus on brand image, customer expectations, and ensuring that the product arrives seamlessly. It’s important to ensure products are high-quality and can be delivered to customers as efficiently as possible.5.
Return: Post-delivery, companies focus on customer support, especially with regard to returned goods and products. Also known as “reverse logistics,” this phase is important for ensuring relationships with customers are not negatively impacted. Ensuring a smooth and seamless return or exchange process is just as important as the delivery process, as it is key to maintaining a positive customer experience.
Supply Chain Management best practices by o9 solutions
In the current economic environment, transforming your supply chain management can give you a significant competitive advantage. One of the best ways to go about this is to adopt the processes, methods, and philosophies of supply chain best practices.
With a complete range of supply chain management solutions available, we’re here to help you future-proof your organisation.
AI/ML: o9’s AI/ML framework learns from multiple historical drivers to come up with a better forecast considering all the planned initiatives and events in the future.
Early adoption: Use data-driven, actionable insights that highlight and prioritise the right areas for planners to focus on.
A single source of truth: o9’s platform provides a 360 view of external and internal drivers of demand, streamlining cross-functional collaboration
Granularity, horizons & frequency: Sense, analyze, plan, and shape demand. Optimize your short- and long-term sales and enhance margin performance.
Early visibility: Improve forecasts by getting early visibility on risks and opportunities.
Get in touch to learn more about supply chain management examples and best practices.
Supply Chain Management software by o9 Solutions
o9’s Supply Chain Management platform’s capabilities solve some of the most complex challenges linked to demand planning, supply planning, revenue management, sustainability, and integrated business planning.
Scattered market visibility and spreadsheets make responding to market changes problematic. o9’s AI-powered digital solution for demand planning provides collaborative analytics, planning and continuous learning that helps your organization eliminate poorly made demand decisions.
o9 Demand Planning Software brings together predictive analytics, assumptions visibility, collaboration, and post-game analytics.
As a cloud-native application running on any of the 3 major cloud providers, the o9 platform can scale without constraints. Furthermore, the o9 platform was designed as an open platform, allowing companies to leverage new sources of data – from customer data coming from smart phone apps to IoT data from connected machines – and new algorithms for completely new use cases.
The o9 Digital Brain is the Most Valuable Platform (MVP) for companies. It allows non digital-native companies to also leverage the power of data – both to digitalize their existing business and for the future digital operating models that are emerging.
Deploy out of the box planning & analytics solutions and add in your in-house analytics. Create a differentiated digital operating model.
Gain insights like never before through a patented graph-based technology.
o9’s game changing Enterprise Knowledge Graph (EKG) provides the richness of modeling & computations to power next-generation Business applications.
Activate impactful AI capabilities on a wide range of applications, from prediction to clustering & segmentation.
Enable an environment for your Data Science & Analytics teams. Deliver targeted analysis faster and in tighter collaboration with business teams.
Native support to the two biggest data science platforms — R and Python. Powerful development environments allow to bring existing Python/R models in an easy-to-use production system
Highest level of security and encryption services to safeguard data whether deploying on a private or public cloud.
Rapid integration connectors for high volume cloud and on-premise data hubs.
Bring together master data and incremental events/triggers that are needed to get comprehensive analytics & visibility.
With a complete range of supply chain management solutions available, we’re here to help you future-proof your organisation.
o9 Solutions recognized as a Leader in the 2023 Gartner® Magic Quadrant™ for Supply Chain Planning Solutions
Download for free the full Magic Quadrant now.
About the author
o9 Solutions
The Digital Brain Platformo9 offers a leading AI-powered Planning, Analytics & Data platform called the Digital Brain that helps companies across industry verticals transform traditionally slow and siloed planning into smart, integrated and intelligent planning and decision making across the core supply chain, commercial and P&L functions. With o9’s Digital Brain platform, companies are able to achieve game-changing improvements in quality of data, ability to detect demand and supply risks and opportunities earlier, forecast demand more accurately, evaluate what-if scenarios in real time, match demand and supply intelligently and drive alignment and collaboration across customers, internal stakeholders and suppliers around the integrated supply chain and commercial plans and decisions. Supported by a global ecosystem of partners, o9’s innovative delivery methodology helps companies achieve quick impact in customer service, inventory levels, resource utilization, as well as ESG and financial KPIs—while enabling a long-term, sustainable transformation of their end-to-end planning and decision-making capabilities.
