Supply chain management (SCM) is a process of transforming raw materials into finished goods by maintaining an efficient flow of goods, services, and information. Supply chains improve business processes by managing supply-side activities and gaining a competitive advantage.
Organisations strive to optimise their supply chains to minimise costs and speed up the time it takes for products to reach customers. As a part of this supply chain process, activities are conducted to ensure that a supply chain is agile and resilient so that it can react to disruptions and maintain a continuous flow.
Different types of supply chains
The following strategies can assist a business in building an agile and resilient supply chain and gaining or maintaining a competitive advantage. Enterprises utilise a variety of models to optimise their supply chains:
The Continuous flow
A supply chain process like this is the most common among manufacturers who deal in a specific type of product or service with minimal modifications.
The fast chain
It is a good model for businesses that change their product line quickly, such as the fashion industry. These models encourage teams to work closely together to take advantage of short life cycle trends as rapidly as possible.
It is applicable to industries with low margins and the need for end-to-end efficiency to remain competitive. It is driven by raw material price changes, primarily.
This model works well for businesses that deal in exclusive products where the value addition is high. Expertise is needed in this model, rather than automation.
This applies to companies that specialise in pre-production stage development, such as prototypes and custom manufacturing. The agile and continuous flow models are combined in this model.
In this model, all models are combined into one. During peak season, it transforms into a model that reacts accordingly, and during a season with low or no demand, it changes its approach based on the current situation. For an organisation to adopt this model, the right set of SCM tools for automation is required, as well as a workforce and supplier base that are ready for it.
Stages of a supply chain
Various stages of supply chain management require proper optimisation. These are the five stages of supply chain management:
Stage 1: Planning and organising
As part of this stage, demand and supply planning are done to ensure goods and services are coordinated from origin to destination. Supply chain planning enables organisations to prepare for risks and disruptions.
Stage 2: Procurement of raw materials and services
The activities involved in sourcing include assessing suppliers, securing supplies, and working with a should-cost analysis to determine the best price.
Stage 3: Production –
In this stage, goods are actually produced, which may include working with partners such as contract manufacturers or different facilities in order to optimise the production process.
Stage 4: Transport and logistics
The finished product is transported and stored, often by third-party logistics providers, before being delivered to customers.
Stage 5: Returns (for defective or unwanted items) –
If quality defects occur, businesses must take steps to resolve the issue.
An organisation that manages these stages effectively can improve productivity and build a strong supply chain strategy.
Do you know how supply chain management works?
Supply chain management can give companies a competitive advantage. The supply chains of companies like Walmart, Amazon, and Zara, for example, are known across the globe for their efficiency and importance to overall business operations.
The following is how supply chain management works:
The supply chain management process can be divided into three stages – product, information, and finance.
In the product stage, the goal is to make a finished product by converting raw materials in a short period of time.
During this stage freight forwarder companies inform relevant team members, suppliers, and customers about every stage. This can involve sharing sales orders or any other supply chain information.
As part of the finance stage, the finance team is responsible for disclosing details about payments received, expected, and delayed and setting procedures for each stage.
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