In the corporate world, supply chain management is handing the overall goods/services between businesses and locations. It also includes managing raw materials and inventory and transferring the goods from point to source efficiently.
Supply chain management (SCM) is the procedure where the goods/services are managed; it also includes transforming the raw materials into final products and delivering them to the consumers.
The supply chain management system is very extensive because it also carries out the businesses’ side activities like maximizing products/services quality, assuring quicker deliveries, and boosting profits. Undoubtedly, supply chain management gives a competitive edge to the companies in the marketplace.
Before you take an interest in knowing about any supply chain management software, you should be aware of the five essential components of SCM. Knowing these attributes or elements is necessary for enhanced effectiveness and sustainability. Below, we’re mentioning the five components in detail; please have a look.
Planning is imperative for managing the daily inventory and other manufacturing processes. Above all, planning is also important to assist the supply chains to work at maximum efficiency. Companies thrive to balance the demand and supply by using analytics tools, including the supply chain management system.
Furthermore, the companies need to keep an eye on the supply chain's demand fluctuations to avoid the Bullwhip effect. For example, many businesses use analytics tools like Material Requirement Planning (SAP ERP system) to evaluate the need for raw materials.
Appropriate planning of the demand and supply is imperative because it gives a fair idea to the companies regarding the required cash flow and how to fulfill the consumer needs. Data evaluated during the planning procedure allows companies to predict the peak season for boosting the sales figures.
The organization needs to find reliable vendors who have the ability to understand the consumers’ needs and preferences. The vendors are also one of the essential components of the supply chain management system.
In supply chain management, sourcing is all about identifying the vendors who can produce the goods or services as per the planning quickly and economically. These vendors should also commit to meeting the required demand constantly, especially during peak season and the rest of the year.
There are specific policies that vendors have to follow to assure the firm that quality goods will be delivered to the consumers. Above all, the vendors should also understand the customers’ needs and preferences.
Sourcing is possible for both perishable and non-perishable goods. When it comes to perishable goods, extra precautions need to be taken to manage the inventory and delivery part.
On the other hand, for non-perishable goods, the supplier should have enough stock of goods to keep the inventory full for fulfilling the consumers’ needs and constant revenue flow.
It is all about transforming the raw materials into the final goods according to the customers' needs and preferences. Like other aspects, making is also considered necessary by the supply chain management software. The making procedure includes various steps like assembling, bundling, quality check, dressing, packing, and final repacking. These steps are followed by the companies that have adopted the supply chain management software.
Furthermore, a company should also optimize the making procedure for 100% customer satisfaction. The making or the manufacturing process is the space where the scope of improvement is always present. Even in the automated production lines, the space for constant improvement is always there.
To review the quality of the manufacturing procedure, looking at the customers' feedback is really important. If the consumers give positive reviews and feedback, it’s a win-win situation for the company and manufacturer. However, the companies should always keep finding ways of improving their production lines.
Apart from other components of the supply chain management system, delivery is the most important one. If the delivery part isn’t reliable, there is no point in manufacturing quality yet economical goods. This component has a significant impact on the company’s face value.
The delivery partner should be capable enough to handle the surge of shipments during the peak season. Before the decided deadline, companies use different transportation sources like road, rail, and air to deliver the shipments before the chosen deadline.
In most organizations, the logistics part is given the lowest priority in the supply chain management software. In our opinion, the companies should also prioritize the ‘logistics’ like the ‘sales’ part and provide funding for better functioning. If the logistic partner is unreliable, it will have an adverse impact on the companies’ sales figures.
Sometimes the delivered goods are of low quality, or the functioning is improper; thus, consumers request the return. The resolutions are money refund or replacement. Consumers return the delivered goods for various reasons, and the companies have to entertain the return request.
This part comes under post-delivery customer support, where the company should understand the return reason and give the resolution. If the company isn’t entertaining the return requests and providing resolutions very late, consumers will stop placing their orders.
In a nutshell, these are the five components of the supply chain management system considered by the leaders while making important decisions. As a result, each component of the supply chain management is very important and shouldn’t be overlooked.
If the company is deciding on the logistics or production, considering all the components is recommended. In the current technology-driven world, various digital initiatives are available that should be undertaken to stay ahead in the competition.
Using the supply chain management software rightly becomes a win-win situation for the companies to stay ahead in the competition and keep the customers happy. Below, we’ve explained the importance of supply chain management.
The supply chain management system thrives on reducing production expenses in multiple ways. For example, if you’re running a clothing e-commerce portal, purchasing the goods directly from the manufacturer is profitable instead of the wholesaler or middlemen. The supply chain management guides you to find reliable sources and get the goods directly from them.
By cutting the middlemen and suppliers, you can plan some strategies directly from the manufacturers. You can develop plans that make the sourcing procedure easier and profitable for both parties. This will help the manufacturers understand the consumers’ needs and preferences and manufacture the goods accordingly.
On the other hand, it becomes easier for the company to get the desired goods efficiently. This entire process builds strong and fruitful relationships with the vendors and promotes success in the longer run.
Let’s understand how supply chain management software balances the demand and supply again with the clothing e-commerce portal. When you’re purchasing goods directly from the manufacturers, you have the chance of negotiating and making the partnership profitable for you.
Therefore, even if the demand surges during the peak season, the goods flow will be constant, and the quality is still maintained. In this way, the supply chain management system balances the demand and supply in the peak season and the rest of the year.
Customer support will be rated positively if consumers are receiving their desired goods cost-effectively and quickly. Customer service is one of the important components of the supply chain management system. Let’s also understand this pointer with the clothing e-commerce portal example.
If your vendors bring the goods directly to your warehouse just after the manufacturing and quality check without any middleman, you’re getting the fresh goods easily.
In other words, your consumers will get fresh goods and will definitely appreciate your customer service. There are fewer chances of your consumers receiving defective and old goods.
Effective supply chain management software enables end-to-end monitoring, direct supply from source to consumer, and better inventory management. There are various benefits of having effective supply chain management; let's have a look at them below.
The frequent flow of information is one of the biggest challenges of the consumers. Believe it or not, 7 out of 10 companies lack automated data flow in the supply chain management system. Adopting smart solutions enables seamless sharing of information and assures enhanced profitability in supply chain management. As a result, the leaders have access to quality and valuable data that allow them to make smart decisions.
Having real-time data regarding the raw materials, available inventory, and upcoming peak seasons, it becomes easier for the companies to generate backup plans. Companies can implement backup plans like getting the raw materials from the backup manufacturer and avoiding potential delays.
However, if the companies have access to smart supply chain management software, there is no need to implement backup plans.
Using automated solutions leads to an improved efficiency rate. Nevertheless, it depends on the companies to invest in the right automation tools to decrease delays, make the customer experience positive, and enhance the brand reputation.
If any company expects a 5% surge every quarter, the retailer will increase their ordered goods by 7%, considering that demand will keep surging. Eventually, there will be strong inflation in the order quantity.
It can also result in the bullwhip effect, leading to delays, lack of communication, and improper goods management. With access to an effective supply chain management system, supply chain leaders can better predict the demand per the changing market conditions.
In the last 4-5 years, the shipping costs of different transportation modes have increased by 5-10%. As a result, optimizing shipping has become one of the priorities for supply chain leaders.
Evaluating the shipping solutions for the small and large shipments allows the companies to deliver orders quickly and minimize shipping costs. These cost savings will be advantageous for the companies in the longer run. Furthermore, these savings can be used to improve the satisfaction level of the consumers.
By better predicting the demand, companies can reduce the overhead costs used for making the inventory revenue-producing. The fulfillment costs of the warehouses also add to the overhead costs. Reducing the overhead costs enables the companies to adopt the required automation solutions to improve daily productivity and manage inventory. This can be expected by having effective supply chain management software.
Evaluating unnecessary spending is another way of achieving cost-effective operations. For instance, if you feel your logistic partner is making deep holes in your pockets, you need to look for another logistics partner providing quality service at the lowest cost.
By using the supply chain management system appropriately, companies have the ability to evaluate the potential risks allowing companies to use their backup plans during unexpected circumstances.
Instead of focusing more on the supply chain problems and taking necessary steps, companies can prevent the adverse impact. By evaluating the risks allows companies to achieve leaner operations.
For instance, if you evaluate the potential risks beforehand, you can reduce the excess goods in the inventory and understand the risks associated with supply chains.
In conclusion, having an effective supply chain management system is imperative for every company. Many companies haven’t realized the importance of using supply chain management. Supply chain management keeps specific business procedures efficient and organized, and it decreases operation and overhead costs, reduces the risks of goods shortages, and improves customer service.
As a result, if you feel there is some space remaining for improving your supply chains, look no further than adopting effective supply chain management.