Supply chain management: Definition, components, and technologies

Making a product to sell in large quantities takes orchestration, collaboration, foresight, and preparation. Getting organized and understanding the basics of how a successful supply chain works are the first steps to scaling up production. This article will guide you through what the supply chain management definition is, and the tasks, objectives, and components you’ll need to do it well.

Supply chain management definition

Supply chain management is handling the flow of how your product is made and all the processes that transform the raw material into the finished product. It’s a critical function within manufacturing and retail because its efficiency impacts the success of other integral parts of the business:

Customer service: A well-orchestrated supply chain means your customer gets the order exactly as they expected on-time, every time. They also expect accessible support should they need it after the purchase, which your supply chain management can influence. Operating costs: The supply chain must be timed in a way that supports the demand level for the product to avoid overstocking and inventory costs. It’s also where you manage supply costs like raw materials and transportation. Financial management: As you speed up the product flow to your customers, you speed up your cash flow into the business. If you can get your product to the customer in 10 days instead of 30, you can invoice them 20 days sooner. Visibility into your supply chain can highlight where you can reduce costs and wait times, and increase profit margins. Components of supply chain management

One common and effective model is the Supply Chain Operations Reference (SCOR) model, developed by the Supply Chain Council to establish best practices for addressing, improving, and communicating requirements effectively. The SCOR is broken into six components. Each includes a set of processes that contribute to production.

Planning

Planning starts with nailing down the details of your operation strategy. First is deciding where you’ll set up shop to make your product – either domestically or internationally – and whether you make the entire product yourself or purchase some components elsewhere. There are benefits and challenges with either so this should be done strategically.

Next, decide how you will produce and store your product. Will you make them in advance and store them to await order? Or, will you make them once the customer orders? You could also have a portion of the final product made in advance and complete production upon order, or offer order customization. You can use any combination of these strategies and the method for performance measurement is established before planning begins.

Sourcing

The next phase is procuring your raw materials and any components you intend to outsource. This needs to happen at the best possible price, at the right time, in the right quantity. It’s important that all suppliers are thoroughly vetted and all contracts are negotiated to get the best value without sacrificing quality. Delivery scheduling is critical, too.

Assessing supplier performance is a continuous requirement for optimal supply chain management, as well as scheduling payments and ensuring import/export requirements are met.

Location

Location is critical for successful supply chain management. A suitable location that is convenient to your resources and materials is ideal.

For example, a carbonated drink company that is set up in a location where water

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