What is Supply Chain Management (SCM)?
Do you think and act smart as a smart business? If yes, embrace the power of intelligent automation and supply chain management.
If you are ready to embrace the power of supply chain management, this article provides a complete insight into its definition, importance, benefits, process, types, timeline and more.
What Will We Cover?
Let us detail what supply chain management is and its importance.
Supply Chain Management Meaning
SCM, or supply chain management, is the coordination of all activities from when supplies enter the product unit until they leave for the customers’ delivery.
Supply chain management is a process that involves the flow of goods, data, and information until they reach the end customers. In short, it is an end-to-end coordination between suppliers, manufacturers, retailers, etc., to ensure that products are produced and delivered safely.
Did you know? The supply chain management market worldwide was worth USD 28.9 billion in 2022. It is projected to touch USD 45.2 billion by 2027, growing at a CAGR of 9.4% during the forecast period. [1]
What is The Importance of Supply Chain Management?
Some of SCM’s important roles include optimizing resources, reducing operational costs, adjusting to the changing market demands, and more. These help deliver quality products to the customers on time and with high reliability.
Here’s why SCM is utterly important:
Did you know? According to Statista[2], the global supply chain management market was valued at 15.85 billion US dollars in 2020 and is projected to reach 31 billion dollars by 2026.
Advantages And Benefits of SCM For Businesses
SCM has several benefits for businesses, so its popularity is rising sharply. Supply chain management helps companies optimize operations, reduce costs, and improve customer satisfaction. Not only this, but SCM also helps improve quality, leads to better delivery rates, and more.
An efficient SCM reduces waste and redundancy and helps companies optimize their resources. For example, Walmart uses real-time inventory tracking and VMI to optimize its supply chain.
Another leading example of companies using SCM for businesses is Zara. It is a fashion retailer that moves clothes from the store shelves in less than 15 days to reduce unsold stock and optimize inventory.
Amazon is also a leading example of using advanced robotics to enable same-day or next-day delivery. It has an advanced level of robotics for AI-driven demand forecasting. As a result, 72% of the orders are fulfilled without any human intervention, with high accuracy.
Advantages And Benefits of SCM for Customers
Efficient supply chain management is not just for businesses, but also to give the best customer experience. Here’s how it helps:
On-time Delivery:
When the products are transported quickly from the manufacturers to the respective distribution centers, they are delivered to the customers’ doorsteps on time, leading to higher customer satisfaction.
For example, real-time inventory updates, advanced logistics software, and local fulfillment centers help customers receive delivery from companies like Target and Amazon within a few hours.
24/7 Product Availability:
With its demand forecasting feature, SCM ensures there are never understocks or overstocks. Supermarkets like Walmart and Tesco use predictive analytics to ensure product demands are met efficiently during the peak season.
High Affordability:
When businesses can save big, they pass those savings on to customers by offering competitive prices. A lean supply chain means cost savings without compromising quality. Global furniture brand IKEA optimizes its supply chain when it picks the furniture and streamlines logistics. This helps the global brand offer affordable pricing to the customers.
Products Tailored To The Customers’ Needs:
Supply Chain Management enables companies to offer customized products while efficiently handling global supplies, giving customers what they want.
Online platforms like Nike By You enable customers to tailor-make their shoe requirements because of the flexible manufacturing and supply chain process.
Let us now check out how SCM works to get you the maximum benefits.
How Does Supply Chain Management Work?
Supply Chain Management is an interconnected platform that collaborates to produce and deliver goods. It begins with the planning phase, in which customers’ demands are evaluated and resources are aligned accordingly. After this, the phase of sourcing the raw materials, manufacturing, and delivery kicks in.
The final stage of the supply chain is monitoring, which ensures that everything is on track with continual monitoring. SCM integrates departments like procurement, warehousing, production, and customer service to ensure a steady flow of goods, cost savings, and improved customer satisfaction.
What is The Responsibility of A Supply Chain Manager?
Fleet managers are meant to monitor and optimize different aspects of the supply chain. They build a strategy, analyze, control, and monitor.
What Are The 5 Steps of the Supply Chain Management Process?
The supply chain management process entails five different steps: planning, sourcing, manufacturing, delivery, and returns. Let’s understand them in detail:
1. Planning:
Planning is the first step in determining the precise needs of the clients. The supply chain management process starts with this initial and fundamental step. Businesses become more organized and efficient when they are aware of their readiness.
Important tasks to perform:An effective planning process ensures that all demands are met on time and efficiently.
2. Sourcing
The sourcing phase includes finding, evaluating, and supervising suppliers to purchase raw materials and other necessary resources for the manufacturing process.
Important tasks to perform:Good sourcing guarantees consistent supply, no delays, product quality, and preservation of brand integrity.
3. Manufacturing
The subsequent phase involves converting raw materials into final products via a regulated manufacturing procedure.
Important tasks to perform:Stress how effective manufacturing guarantees consistency in quality, lowers costs, and increases product availability.
4. Delivery
The goods that have been stored are being delivered during this distribution phase.
Important tasks to perform:A high customer satisfaction rate is guaranteed through on-time deliveries.
5. Returns (Reverse Logistics)
This phase involves managing the return of goods due to manufacturing defects or the recycling process.
Important tasks to perform:A well-coordinated return process reduces the waste to a great extent and leads to a high customer satisfaction rate.
There are different types of supply chain management. Check them out!
What Are The Types of Supply Chain Management (SCM)?
Businesses worldwide are adopting different supply chain management types depending on their needs. They can choose their model as per the strategy they are using. Here are a few types of SCM:
Continuous Flow Model
This is a perfect choice for manufacturers who produce the same goods continuously, such as food, dyes, chemicals, etc. This model ensures that goods are produced continually without hassles.
Fast Chain Model
This model is used for products with shorter life cycles and high demand. Fashion and consumer electronics are examples of products that fall into this category.
Efficient Chain Model
This model is used when the markets are competitive and cost-sensitive, and low margins are an essential consideration. It focuses on reducing waste and increasing productivity.
Agile Model
This model is used when customers’ unpredictable demands and products are fully customized. It enables users to adapt to changes in supply or demand disruptions.
Custom-Configured Model
Applied in the industries where products are built on order, like custom technology solutions and machinery. It combines the characteristics of both the agile and efficient chain models.
Flexible Model
It is best suited for companies that face seasonal demand shortages or frequent product changes. The model easily adapts to shifting needs and maintains cost-effectiveness.
Any business’s choice of Supply Chain Management depends mainly on the market, customer satisfaction rate, and cost management to stay competitive.
Now is the time to know the past, present and future of supply chain management.
What is The Past, Present, and Future of Supply Chain Management?
Supply Chain Management has been thoroughly transformed in the past decade. It used to be an overly complex, error-laden, and data-driven process, but now it is powered by automation and AI. The trend of IoT and AI in logistics will evolve drastically.
Here’s the history, present, and future of SCM in detail:
History of Supply Chain Management
Logistics and every other supply chain operation used to be manual. In the 1960s and 1970s, the development of the Material Planning Requirement System began to integrate into the inventory planning and production process.
The 1980s was an era when Just-in-Time (JIT) and lean manufacturing principles significantly influenced efficiency.
The 1990s were the time of ERP (Enterprise Resource Planning) and SCM. Big companies like Walmart, Dell, etc., are better at supplier collaboration and real-time data usage.
Companies like Dell and Walmart led innovations in real-time tracking, data usage, and supplier collaboration. The advent of the internet in the 2000s led to globally connected supply chains.
Current Trends in Supply Chain Management
The present day is an era of highly interactive, interconnected supply chains.
Also, digital and physical channels are integrated to meet the rising and changing consumer expectations.
Future of Supply Chain Management
The future of SCM is in intelligent automation, getting real-time analytics, and customization
SCM has been evolving continually, and green logistics will undergo a dramatic change in the future.
Wrapping Up
Supply Chain Management is much more than just logistics. It is an invisible force behind the success of supply chain operations. Whether a global brand or a small business, you can rest assured of growth with the right supply chain management software.
Key Takeaways:
Frequently Asked Questions (FAQs)
Do you have queries related to supply chain management? Let us know if you have doubts..
1. What is the difference between logistics and supply chain management?
The difference between logistics and SCM is that logistics focuses on the movement and storage of goods. On the other hand, SCM entails activities like planning, sourcing, production, etc.
2. What are the features of supply chain management?
Some of the key features of SCM include demand forecasting, real-time tracking, and integration with ERP systems.
3. What is the career scope and pay for supply chain management jobs?
SCM offers a wide range of lucrative careers and competitive salaries. Salaries vary and typically range from $60,000 to $120,000 annually, depending on your experience and role.
4. What is the best software for supply chain management?
SAP SCM, CommuteLogix, Oracle SCM Cloud, and Market Dynamics 365 are some of the top softwares for supply chain management.
5. What are the key functions of supply chain management?
Supply chain management has several functions. Some top ones include procurement, production, inventory management, logistics, and customer service.
Transform Your Supply Chain Operations With iCommuneTech
Businesses can transform their supply chain operations with cutting-edge software solutions. If you are one of the businesses that want to stay ahead with the best cutting-edge software for supply chain management, contact us today!
Irshad Pathan
Web Development Expert
Irshad is a senior technical expert at iCommuneTech. He manages the iCommuneTech’s Web Development Team, and has hands-on expertise in web development, Laravel development, Logistics, fleet management, and Supply Chain Management. He mentors the in-house team and enjoys describing his experience in words.