What is Supply Chain Management, how does it work? How does it help companies.
Supply chain management in simple terms mean the flow of goods or services, which includes transforming raw materials into final products and making them available to the consumer at the right time, with the right quality and the right price which the consumer can afford to buy, plus these final products need to be made available to the consumer at the right place where the consumer is located. Today the entire business concept has redefined itself from the traditional model. The end consumer today is well-informed about each product he wants to buy plus the assortment of products from various manufacturers has also given a better edge to the consumer to choose what he/she wants that fits into his/her lifestyle and wallet. Demand for a product in the market today is mostly driven by the consumer rather than the manufacturer or retailer, hence manufacturers and retailers are in a race to make sure they satisfy this demand of the consumer and that is where supply chain comes in to play. Right from sourcing or procuring the right raw material, making it available for production at the right time and getting the end product into the market requires a lot of planning and designing your supply chain network to work efficiently and effectively. Local or global companies when they introduce a product in the market and advertise, the entire market in the country and all the sales counters need to have the product where the customer can buy, any glitch in the product not being available at the right time can result in the drop in customer interest and demand which can be disastrous. Transportation network design and management assume importance to support sales and marketing strategy.
Inventory control and inventory visibility are two very critical elements in supply chain for these are the cost drivers and directly impact the bottom lines on the balance sheet. Every business has a standard for inventory turnaround that is optimum for the business. The health of the inventory turn relates to the health of the business. In a global scenario, finished goods inventory is held at many locations (warehouses) and distribution centres, managed by third parties. Any loss of inventory anywhere in the supply chain would result in loss of value, effective control of inventory and visibility of inventory gains importance as a key factor of Supply Chain Management.
Supply chain management is a complex process and involves a lot of planning and forecasting right from inception or sourcing which is the first stage. The complexity begins when more and more players from transportation vendors, raw material suppliers, third party providers handing warehouse operations, distributors and retailers make the supply chain look Brobdingnagian. With the advent of technological advancement, most of the supply chain functions are getting simplified. Technology has not only reduced supply chain timelines by increasing its reliance on system and application capabilities to manage critical processes. Blockchain technology, artificial intelligence, machine learning, and big data are some of the examples of technological advancements that are applied in supply chain operations making supply chain work seamless reducing the unsolicited disruptions caused by lack of right information sharing throughout the chain of supply. Blockchain technology gives utmost transparency and unprecedented privacy in terms of all the transactions that take place in a supply chain process. Blockchain is ideal for tracking assets making it helpful in transport management, meaning capture and review shipment location, costs, security, and conditions. With Machine learning and Big Data, companies can now predict what the customer wants, his/her buying pattern, this helps them offer tailor-made packages to suit each of these customers, which in turn helps companies improvise on their supply chain network, improving efficiency and being a responsive supply chain. Data Analytics is being implemented in supply chain to design a supply chain for the future, it is used to plug any data gaps, including knowing supplier and customer location, customer forecasts, transportation costs and realised raw and adjusted service levels, among other key inputs. IOT, Big Data and data transparency will improve organisations’ ability to gain visibility on the real time status of their supply chain network, thus giving them the ability to anticipate and prevent unforeseen disruptions more effectively. Supply chains around the world are being transformed at such a rapid pace that very soon, we will have drones delivering our products and these products will be packed, prepared for distribution by robot increasing delivery efficiency, plus reducing the wait time of a customer to a few days or in some cases a few hours from placing an order.