Ready to jump into a career in Supply Chain Management? A career in this domain is in high demand these days, with studies predicting that Supply Chain jobs will grow at twice the rate of all other jobs. But do you know what Supply Chain Management is all about? It's important to understand how organizations like Ford, Walmart, Amazon, and Amul have built fortunes by getting their Supply Chain Management right. We've put together an article breaking down Supply Chain Management, to help you understand it at the most fundamental level.
What exactly is Supply Chain Management? Let’s break it down.
Supply Chain Management is the management of the flow of data, materials, and finances related to a good or service & bringing together suppliers to effectively move a product from its conception to the customer's hands while taking supply and demand into account. But there is a lot more to it than meets the eye. Read on to understand more.
5 Most Important Supply Chain Management Processes
The main responsibility of supply chain professionals is to coordinate all activities, from product manufacturing to shipping and distribution, from one central location. These 5 components are necessary to create and deliver high-quality products/services on time & within the allotted budget.
- Planning: To fulfill the customers’ demand for a company's product or service, companies need to plan and manage the necessary resources. Once the supply chain is in place, professionals choose KPIs to gauge its performance in terms of customer value delivery, efficiency, and effectiveness.
- Sourcing: In this phase, the companies select vendors to offer the products and services required to produce the final product. They also need to create processes to oversee and manage supplier relationships. The focus is on ordering, receiving, and managing inventory, & revenue.
- Manufacturing: Here, the organizations set up the processes needed to receive raw materials, create the product, test it for quality, and package it for distribution. There might be numerous iterations before the final product is out.
- Delivering: This is the critical juncture where the company’s brand image, customer satisfaction & product quality is at stake and professionals ensure the product reaches the customers seamlessly.
- Returning: A flawless return or exchange process is essential to maintaining a positive client experience and is just as crucial as the delivery process.
6 Principles Of Supply Chain Management
- Establish a supply chain structure: A supply chain must have a solid foundation. The success of a supply chain is based on its structure. Many companies prefer centralized supply chain management (a single hub & operations are limited to a central location), while others see decentralization (operations are spread out over a series of nodes - different locations - in a network) as a method of success. Many modern businesses have devised a hybrid system that combines centralized strategy & decision-making with decentralized operations & workload. This system provides a more adaptable and flexible structure.
- Align demand planning across the supply chain: Professionals in the supply chain are taught to exchange information with business partners to reduce unnecessary stock. The Supply Chain professionals pay attention to market signals and adjust demand planning accordingly throughout the supply chain to ensure accurate projections and efficient resource use.
- Adapt the supply chain to customers’ needs: Companies that manufacture consumer packaged products face a constant problem in predicting what customers want and when they want it. Hence, companies segment customers based on the service needs of distinct groups and adapt the supply chain to serve these segments profitably.
- Leverage real-time data across all points of the supply chain: Supply chain planning typically involves a myriad mix of suppliers, channels, customers, and pricing schemes. Using spreadsheets can become large and potentially ineffective—especially when real-time data is not used. Nowadays, companies have started incorporating Supply Chain SaaS solutions that use real-time data and IoT to allow planners to be accurate and reduce the risk of stock-outs or surplus inventory.
- Outsource strategically: This is the principle that stands the test of time. Organizations that strive and manage to reduce the total cost of ownership of goods and services by strategically managing sources of supply always profit in the long run.
- Leverage technology: Adopting technology has become a standard operation in supply chains. The challenge is to select a platform that fits your needs. Platforms, such as ERPs and SAPs, are powerful tools to streamline processes, increase visibility, minimize paperwork, and automate certain activities. Transportation management systems enable you to make smarter business decisions that help in increasing efficiency & reducing risk. A strong platform helps streamline SCM and works in tandem with your company's strategy.
Why Do Companies Focus On Improving Their Supply Chains?
Implementation of supply chains is growing tremendously, with trade volume doubling over the past 20 years. Supply Chain Management is a USD 215 billion industry growing at a CAGR of over 10%. With its expected growth, the supply chain has become a significant part of economic development as well as a backbone of Corporate India. Supply Chains are no longer just a support function but have become an engine for new business models & customer experiences.
- Profits can be doubled by lowering the costs of the supply chain: Optimization and cost-cutting are always beneficial in supply chains since they have a substantial impact on business profitability. The optimized supply chain of a company costs 7.9% of the overall company costs whereas an average one costs 13.2%. This accounts for 40% savings.
- Supply Chain Management is a growth driver, not a cost center: Supply chain executives are witnessing an increase in demand for a broader range of products that are personalized (76%), reliable (73%), sustainable (69%), and delivered quickly (76%). The supply chain workforce is in the middle of a digital transformation. Adaptability & flexibility can create value for businesses & drive growth.
- It improves customer experience: According to the report by Accenture, 70% of supply chain professionals believe that SCM will be a key driver of quality customer service. Effective supply chain management and product flow can help you reduce issues faced by customers while maintaining high customer satisfaction.
The Bottom Line
The future is in the supply chain management industry! Well, it's hard to argue as more than 14% of the massive USD 400 billion of India’s GDP is dependent on supply chains & logistics. With every passing year, the demand for innovations and technologies that will improve the efficiency of the SCM and consumer satisfaction is growing exponentially.
This industry is forever changing, with some sectors evolving at a faster pace than others. Given these changes, there are tons of opportunities for individuals with expertise in SCM. This industry employs over 25 million people and continues to increase its hiring rate by 7%. With the workforce expected to grow by 30% by 2030 (U.S. Bureau of Labor Statistics) and the need for supply chain professionals to help businesses reach their potential increasing, this will continue to be a hot field.
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