What is Supply Chain Management (SCM)?
Supply chain management (SCM) is a broad range of activities required to plan, control, and execute from materials to production for delivery in potentially the most economical way.
SCM incorporates integrated planning and implementation of the processes needed to optimize the flow of materials, information and capital into functions that include demand planning, sourcing, production, inventory management and logistics – or storage and transportation. Companies use both business strategy and specialized software in these efforts to create a competitive advantage.
Supply chain management is a broad and complex undertaking that depends on each partner from suppliers to manufacturers and beyond to run well. As a result, effective supply chain management also requires change management, collaboration, and risk management to create alignment and communication among all participants.
In addition, supply chain sustainability covers environmental, social, and legal issues in addition to sustainable procurement and a closely related concept of corporate social responsibility that evaluates a company’s impact on the environment and social welfare of the companies.
Benefits of supply chain management
There are a number of benefits of Supply Chain Management. Listed below:
- Lower Inventories
- Lower Costs
- Higher Productivity
- Greater Agility
- Higher profits
- Increased Collaboration
- Higher Revenues
- Shorter Lead Times
- Greater Customer Loyalty
- Increased Customer Service
- Enables Companies to better manage Demand
- Deal with Disruptions
- Keep costs to a minimum and meet customer demand in the most effective way.
These SCM benefits are achieved through effective strategy and choosing the appropriate software to manage the increasing complexity of today’s supply chain.
What is the process of Supply chain management?
“Supply chain management is the process of transporting products from raw materials to the consumer that includes product planning, demand planning, supply planning, sales and operations planning, and supply management.”
The supply chain management process comprises four important parts: 1. Demand Management, 2. Supply Management, 3. Sales and Operations Planning 4. Product Management.
- Demand Management
Demand management consists of three main parts: 1. Demand Planning, 2. Merchandise Planning and 3. Business Promotion Planning.
- Demand planning is the process of seeking to ensure that products are delivered in a reliable manner. Effective demand planning can improve the accuracy of revenue forecasts, align inventory levels with peaks and troughs in demand, and increase profitability for a particular channel or product.
- Merchandise planning is a systematic approach to streamlining investment on purchases, buying and sales, to maximize investment (ROI), as well as providing markets at locations, times, prices, and quantities.
- Business promotion plans are a marketing technique to increase demand for products in retail outlets based on special pricing, performance fixtures, display, value-added bonuses, no-obligation gifts and other promotions. Trade promotions help drive short-term consumer demand for products typically sold in retail environments.
2. Supply management
Supply management is consists of five main areas: 1. Supply Planning, 2. Production Planning, 3. Inventory Planning, 4. Capacity Planning and 5. Distribution Planning.
- Supply planning determines how to meet the requirements created by the demand plan. The objective is to balance supply and demand in a way that achieves the financial and service objectives of the enterprise.
- Production planning plays a key role in addresses the production and manufacturing modules within a company. It considers the resource allocation of employees, production capacity and materials.
- Inventory planning determines the optimal amount and time of inventory to align with sales and production needs.
- Capacity planning determines the production staff and equipment required to meet the demand for products.
- The distribution planning oversees the movement of goods from a manufacturer or supplier to the point of sale. Distribution management is an overlapping term that refers to processes such as packaging, warehousing, inventory, supply chain and logistics.
3. Sales and operations planning
Sales and Operations Planning is a monthly integrated business management process that empowers leadership to focus on key supply chain drivers including sales, marketing, inventory management, demand management, production and new product introductions.
The aims of Sales and operations planning are to enable executives to make better-informed decisions through a dynamic connection to plans and strategies throughout the business. Often repeated on a monthly basis, Sales and operations planning enables effective supply chain management and focuses on delivering the resources of an organization that their customers need while remaining profitable.
4. Product Management
Product management is a process from product idea creation to market introduction. Create an idea for a product and follow it until the product is introduced to the market. A company should have an exit strategy for its product when it reaches the end of its profitable life or if the product does not sell well.
Product management includes new product introduction, cannibalism scheme, end of life planning, commercialization and ramp planning, contribution margin analysis, portfolio management, and brand & platform planning.
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