Supply Chain Management- Definition, Components, and more

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Created on January 28, 2021

Long gone are the days when businesses were restricted by geographical boundaries and operating within a particular zone. In today’s highly interconnected world’s economy, businesses have the freedom to operate across different countries. All thanks to the technological innovations as well as modernization in the supply chain industry. Let’s dig deeper about supply chain management:

What is supply chain management?

SCM is the management of the flow of goods or services from source to destination by following activities like demand planning, raw material procurement, production, inventory management, order management, movement and storage, and transportation and logistics. To manage these processes, earlier businesses used to follow traditional ways, which resulted in increased supply chain cost and high manpower demand.

But to meet the growing expectations of the customers and make supply chain operations cost-effective, businesses are either inclining towards digital platforms or integrating SCM software for managing operations like material handling, product/service creation, order fulfilment, and more. Now the ongoing Covid-19 pandemic has triggered this transformation and those who were either reluctant or were not sure about digitizing their SCM operations are leveraging technology platforms for their survival and longevity. 

According to Statista, the global supply chain management market is expected to reach 37.4 billion U.S. dollars by 2027. This number was 15.85 billion U.S. dollars in 2019.

What are the key components of the supply chain management system?

The five major components of supply chain management include:

Planning

This component focuses on building operational strategy for your business. Some of the considerations involved in the planning are- deciding whether to target the domestic or international market, whether to produce or manufacture the complete product in-house or hire resources, how to manufacture the product, and more.

Sourcing

This phase deals with procuring the raw material at the right price, time and quantity. For this, one has to connect to different suppliers and get the best rates for the raw material.

Manufacturing

As the name suggests, this phase involves the processes like assembling, making, testing, packing, and storing the product.

Delivery

Delivery deals with the logistics and transportation of the products. It also includes distribution of the products to different warehouses. 

 Returns

This phase includes activities that are needed to perform when a customer raises a return request or is not available at the given address even after making multiple delivery attempts. In the former case, the processes include are- picking up products from customers’ location, identifying the product condition, proceeding returns, and initiating refunds.

What are the Pain points in Supply Chain Management?

1.       Manual processing of various operations

2.       High SCM cost

3.       Inefficient risk management

4.       Inability to deliver orders on time

5.       High manpower requirement

6.       Lack of actionable data and insights

Also Read- Supply Chain Challenges Faced By Manufacturing Companies

How to overcome common supply chain management challenges?

As aforementioned, the most viable option to avoid supply chain-related problems and fix the ones that your business is struggling with is by integrating supply chain management software. Once you integrate it into your existing ERP/SAP systems, you would be able to-

·       Minimize the overall supply chain cost

·       Have visibility on all the supply chain operations

·       Track shipments in real-time 

·       Improve customer experience and ensure transparent communication

·       Avoid incidental charges

·       Take better decisions with the help of analytics and insights

·       Minimize dependency on human professionals

·       Automate processes like order segregation, processing, and invoicing

·       Improve inventory and warehouse management

·       Ensure on-time deliveries

You can choose to develop a dedicated supply chain management software for your business or search for a SaaS-based SCM software provider like Shipsy. If you choose the latter one, then you can get the software deployed in hours. However, the former might take months or even years to develop.

Future of supply chain management

To bring businesses back on track, enterprises are digitally transforming the supply chain operations at an unprecedented rate. We can say that global adoption of technologies along with automation of processes is the future of the supply chain industry.

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