Supply Chain Management Definition, Processes, & Difference With Logistics

ACTIVELY SHARE – Supply chain management (SCM) is the foundation that supports the fulfillment of consumer needs carried out by manufacturing, retail and wholesale businesses.

In other words, SCM is a critical success factor for these businesses.

The supply chain in every business can be different. The most basic version includes the company, its suppliers, and the company’s customers.

However, for larger companies, the scope is also wider.

In this article, we discuss in detail what supply chain management is, what its components are, and simple tips for optimizing it.

What is Supply Chain Management?

Supply Chain Management is a series of activities required to plan, control and execute product flows.

This includes the process of obtaining raw materials, production processes, to distribution of products to end consumers, in the most efficient and cost-effective manner.

SCM is a vast and complex undertaking that relies on every partner – from suppliers to manufacturers and beyond – to run well.

The goal of supply chain management is to maximize customer value and gain a competitive advantage in the market.

To achieve this, it takes various efforts, both business strategies and special software.

Supply Chain Management Goals

The main objective of supply chain management is to manage, and coordinate supply & demand effectively.

Thus, problems that may arise in the supply chain management process can be handled effectively and efficiently.

The problems that usually arise in supply chain management are:

  • Procurement of goods and management of suppliers
  • Relationship management with customers or clients
  • Determining the level of outsourcing

By overcoming these problems, your business can excel in today’s increasingly competitive market competition.

Therefore, companies must produce products that are of high quality, inexpensive, have various attractive variants, and are produced on time.

Also read: What is PPIC (Production Planning & Inventory Control)?

Processes in Supply Chain Management

Supply Chain Management involves so many processes, from production preparation to meeting consumer needs.

The following is an explanation of the role and function of each process in it.

Planning

There are several activities involved in the planning stage, from forecasting consumer demand, purchasing planning, and production planning, to labor preparation and transportation.

Forecasting consumer demand (demand forecasting) is done so that sellers can find out the type and number of products that must be prepared during a certain period of time.

This is important to ensure that the process of producing and selling goods is in accordance with consumer demand.

In making forecasts, sellers should look at sales and inventory reports, and pay attention to market trends.

To automate demand predictions, sellers should consider using an inventory management system.

This system provides accurate inventory reports and forecasting tools that allow users to get predictive results in just seconds.

Purchase or Procurement

After knowing the types and quantities of goods that must be purchased through demand forecasting, now is the time to obtain these goods.

Procurement is the acquisition of goods at the best price, in the right quantity, and at the right time.

The procurement process usually involves several stages, namely purchase submissions, assessment submissions, purchase approvals, and orders to suppliers.

Admin is responsible for checking and recording what to buy and then submitting it to the purchasing manager.

Procurement will become easier and simpler with the help of purchasing management system.

With this software, the purchasing department can create quotation requests, purchase orders, purchase approvals, and umbrella contracts instantly.

Good procurement software even provides a supplier portal to speed up the ordering process to suppliers.

Production

The production process is the process of processing all raw materials into finished products. This process usually involves not only human labor but also machines.

Stops in the production process can cause delays in delivery of orders and of course lead to customer dissatisfaction.

Therefore, downtime must be eliminated by ensuring the productivity of the workforce, machines and equipment.

Read also: Production Planning | Effective Tips to Improve Production Planning.

Warehouse Management

After the production of goods is completed, the goods must be entered into the warehouse.

Warehouse management consists of the process of entering ( inbound ) and outbound ( outbound ) goods, picking and packing, cross-docking , and stock taking.

All incoming and outgoing goods must be recorded.

Stock taking must also be carried out periodically so that there is no difference between the actual physical number of goods and the number of goods recorded in the books.

All these time-consuming warehouse activities can be automated with the help of warehouse management software .

Order Delivery

After picking up and packing the ordered goods from the warehouse, the next step is to send them to the customer.

Courier and transportation must be prepared in advance so that the goods can be sent immediately.

To ensure that orders reach the customer in a timely manner, the seller should have tools to track the courier.

With EQUIP Inventory, you can track your courier’s whereabouts via your smartphone.

This system also allows the courier to confirm when the order has arrived at the customer.

Please read Market Leader Strategies, Benefits, And Examples

Order Return

Order returns usually occur when a customer requests a return due to damage, error, or delay.

This process involves several activities such as checking product condition, authorizing returns, replacing products, and scheduling deliveries, refunds.

Difference between SCM and Logistics

Difference Between SCM And Logistic
Difference Between SCM And Logistic

The terms supply chain management and logistics are often confused or used interchangeably, but they are actually different.

Logistics is a component of supply chain management.

It focuses on moving the product or material in the most efficient way so that it arrives at the right place at the right time.

In contrast, SCM involves a wider range of activities, from sourcing raw materials, sourcing goods and raw materials at the best prices, and coordinating visibility efforts across the supply chain network.

Also read: Tips to Simplify Supply Chain Management in Manufacturing Business.

Optimizing Supply Chain Management (SCM) with Automated Solutions

It is undeniable that supply chain management can be a very complex series of activities. The bigger your business, the more complex your supply chain will be.

Fortunately, with the help of technology, you can not only simplify it but also optimize it.

The trick is to increase efficiency in every process involved in supply chain management.

You must be able to ensure that you can get goods or raw materials from suppliers in the right time and quantity, so that there are no delays that prevent fulfillment of needs.

This may sound difficult, but with the help of an SCM system, everything can run more efficiently and effectively.

With the EQUIP SCM system, you can automate the entire supply chain management process, from planning (including demand prediction), procurement, stock checking, order delivery, to product returns.

Integrate this system with other systems such as accounting, sales and logistics for more complete supply chain visibility.


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