What is Supply Chain Management (SCM) - Types and Working

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Supply chain management is about managing the flow of products from start to finish. It helps companies make products more efficiently, save money, and get them to customers faster. As a result, this also helps prevent problems like product recalls and bad press. With the help of this comprehensive article, we will elaborate on the details of SCM. In addition, we will clear all your doubts in the end.

Supply Chain Management Definition

Supply chain management ensures a company’s products are made and delivered efficiently. It helps streamline the process from raw materials to finished products and getting them to customers. As a result, this allows companies to save money, improve quality, and get an edge over their competitors.
 

Supply chain management is about managing the entire process of making and delivering products. While logistics is part of it, there’s much more involved. Today, computers help manage everything from getting materials to creating products, fulfilling orders, and tracking everything. This includes suppliers, manufacturers, transporters, and retailers.
 

Supply chain activities cover everything from buying materials, managing product life cycles, planning production and inventory, handling transportation, and managing orders. It can even involve international trade, like managing suppliers and output in different countries.

History of Supply Chain Management

Supply chains have been around for a very long time. With factories and machines, companies got better at making and delivering things. Henry Ford made cars in a new way that helped make more cars for more people. Computers have made supply chains even better. For a long time, supply chains were mostly done by special people who worked in a certain way.
 

The internet, new technology, and the need for things now have changed how supply chains work. Supply chains used to be simple, but now they’re more complicated and connected. Customers want their orders when they want them and how they want them.

We live in a world where businesses are happening everywhere and technology is always changing. Customers want things fast and exactly how they want them. To succeed, companies need to have a way of working that can bring together people, processes, and technology to deliver things quickly and accurately.

What are the 5 Stages of Supply Chain Management?

Supply chain managers do more than just shipping and buying things. Moreover, they need to make things work better, save money, avoid having too little or too much, and be ready for anything unexpected. The supply chain process usually has five steps:
 

1. Planning

To make supply chains work well, companies usually start by planning. They try to guess what they’ll need in the future and prepare for it. In other words, just think about the materials needed for each step of making things, how much their machines can do, and how many people they need.
 

2. Sourcing

To make supply chains work well, companies need to have good relationships with the people who sell them the things they need to make their products. As a result, this is called sourcing. Different businesses need different things. In general, sourcing means making sure companies have what they need. 

When choosing suppliers, companies need to make sure that:
 

• The materials are the right kind for making the products.
• The prices are fair.
• The suppliers can deliver things quickly if there’s a problem.
• The suppliers have a good history of delivering things on time and of good quality.

This is especially important when companies work with things that can go bad quickly.
 

3. Manufacturing

Using machines and people to turn materials into something new is the most important part of supply chain management. Apart from this, the new thing is the final goal of making things, but it’s not the end of the whole process.

Making things can be divided into smaller parts like putting things together, checking them, and packing them. When making things, companies should be careful about wasting things or doing things wrong. For example, if they use too much material because their workers aren’t trained well, they need to fix the problem or return to an earlier step in the process.
 

4. Delivery

After making products and selling them, companies need to get them to their customers. Good supply chain management means having a strong system for shipping and delivering things on time, safely, and at a good price. Companies should have different ways to deliver things in case one way is not working. For example, what if there’s a lot of snow where things are shipped from?
 

5. Returns

When customers return products, companies need to be able to take them back and give customers their money back. This is called reverse logistics. In addition, returns can help companies find out if products are broken or not good enough. If companies don’t fix the problems that cause returns, they will likely continue to have returns in the future.

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Working of SCM

Supply chain management is like the backbone of a business. It's all about getting the right things to the right places at the right time. To do it well, companies need to use different tools and processes. Here's a working of SCM in detail. 
 

Stage 1: Planning

• Forecasting: Predicting what customers will want.
• Supply planning: Making sure there are enough materials.
• Production planning: Deciding how much to make.

Stage 2: Product Lifecycle Management (PLM)

• Managing products: Tracking a product from idea to recycling.
• Collaboration: Helping everyone work together.
• Information: Providing information about products.

Stage 3: Procurement

• Buying things: Getting materials, goods, and services.
• Quality and price: Making sure things are good and fair.
• Predicting needs: Using tools to guess how much to buy.

Stage 4: Logistics

• Moving things: Transporting and storing goods.
• Managing fleets: Keeping track of trucks and other vehicles.
• Managing warehouses: Organizing and storing products.

Stage 5: Manufacturing Execution (MES)

• Monitoring production: Watching and tracking how things are made.
• Lean manufacturing: Making things efficiently.
• Quality and sustainability: Ensuring good quality and protecting the environment.

Stage 6: Enterprise Asset Management (EAM)

• Managing assets: Taking care of things like machines and vehicles.
• Using technology: Using sensors and other tools to manage assets.
• Predictive maintenance: Predicting when things need to be fixed.

Benefits of Supply Chain Management

For many businesses, supply chain management is very important. But it’s often hard to decide whether to keep using old systems or to build new, modern ones that can grow with the business. Some of the good things about using modern chain supply management include:
 

• Efficient machines: Using special systems can help machines work better and faster.
• Improved workflows: This can fix problems and make things work smoother.
• Faster delivery: Automated processes and data analysis mean things get to customers faster.
• Less waste: Using predictive analytics helps avoid having too much or too little of something.
• Better asset use: IoT makes machines work more efficiently.
• More accurate forecasting: It helps avoid problems like half-full trucks and inefficient delivery routes.
• Adaptability: Modern systems can change quickly to handle different situations.
• Real-time data: Information helps managers make decisions quickly.
• Customer feedback: Companies can listen to customers and act fast.
• Customer-focused design: Feedback helps design products that customers want.
• Data-driven improvements: Insights from machines help make products better.
• Customer-centric approach: Modern systems focus on customer needs.
• Personalized service: Companies can offer tailored products and services.
• Visibility: Companies can see everything from design to delivery.
• Environmental impact: This helps reduce the harm to the environment.

List of Supply Chain Management Tools

Many software programs can help people who manage supply chains. Here’s a list of top 10 supply chain management (SCM) tools that can help optimize various aspects of the supply chain:
 

1. SAP SCM: Comprehensive suite for planning, execution, and collaboration.
2. Oracle SCM Cloud: Cloud-based solution for managing supply chain processes and data.
3. Microsoft Dynamics 365 Supply Chain Management: Integrated solution for finance and operations.
4. Infor CloudSuite SCM: Industry-specific solutions with analytics and automation.
5. JDA Software (Blue Yonder): Focuses on demand and supply planning and inventory optimization.
6. Kinaxis RapidResponse: Real-time analytics for supply chain planning and collaboration.
7. Manhattan Associates: Specializes in supply chain optimization and logistics management.
8. SAP Ariba: Facilitates procurement and supply chain collaboration.
9. IBM Sterling Supply Chain Suite: AI-driven insights for visibility and management.
10. Project44: Provides visibility solutions for transportation and logistics.

These tools are widely recognized for their capabilities in enhancing supply chain efficiency and effectiveness.

Role of Supply Chain Management Software

After understanding the various types of software, we will move further to its role. In addition, these tools can help with things like:

• Managing inventory: Keeping track of how much of each product you have.
• Controlling orders: Keeping track of customer orders.
• Managing warehouses: Organizing and keeping track of products in warehouses.
• Organizing transportation: Planning and tracking how products are shipped.
• Predicting demand: Guessing how much of a product customers will want.
• Managing relationships with suppliers: Building and maintaining good relationships with suppliers.
• Handling the whole business: Using a system that helps manage all parts of a business.
• Analyzing supply chains: Looking at data to understand supply chains better.
• Seeing the whole supply chain: Understanding what's happening with products as they move through the supply chain.

These tools can help businesses work more efficiently and save money. For example, ERP systems can help you see what's happening in your supply chain in real time, so you can make decisions quickly. WMS and TMS can help you manage your warehouses and transportation more effectively.

Example of SCM

Walgreens, a big pharmacy company, wanted to improve its supply chain. Moreover, they invested in technology to make the whole process better, using big data from their stores and suppliers to predict things better and manage sales and inventory. In 2019, they hired a new person to be in charge of their supply chain.

Walgreens also made the supply chain part of its plan to be a good company for the environment and society. In addition, they asked suppliers to fill out a survey about their practices, like if they have goals to reduce emissions and what materials they use.

Final Verdict!

Supply chain management is necessary for businesses to be successful today. By doing things better, saving money, and making customers happy, companies can do better than their competitors. However, good supply chain management includes planning, getting materials, making things, shipping things, and handling returns. Additionally, technology helps make these things work better, from using data to using machines. By investing in supply chain management, businesses can build strong supply chains that can change with the times.