A Beginner's Guide to Supply Chain Management

No matter what industry you work in or the products and services your company offers, proper supply chain management is critical for smooth operations. To drive efficiency and profitability companies must have effective management of raw material sourcing and its journey through the supply chain. 

Whether it’s delays in raw materials, recalls, or the shipping of incorrect products, inadequate supply chain management can impact customer delivery schedules and satisfaction and in the end affect business reputation. 

In this guide, we’ll cover the basics of supply chain management – leading to better decision-making, real-time insights, and greater profits. Understanding the fundamentals of supply chain management is crucial for grasping how these systems operate and impact business success.

What is Supply Chain Management (SCM)?

Global analyst firm, Gartner, defines supply chain management (SCM) as “the processes of creating and fulfilling demands for goods and services. It encompasses a trading partner community engaged in the common goal of satisfying end customers.” 

Although this definition may seem easy to understand, the reality is that supply chain management is a complex data management science that integrates people, processes, and technology. 

All three must work in unison to optimize decision-making. Effective supply chain management efforts use data from internal operations, in addition to information stored externally, in supplier networks. For organizations, this means accessibility to comprehensive data networks is key when it comes to supply chain management. 

How Supply Chain Management Works

For decades organizations have worked to optimize their supply chain. Effective operations management within the supply chain is key to these optimizations, ensuring that resources are used efficiently and processes flow smoothly. Historically, this practice was done manually, relying on the expertise of individual people within the organization. Over time, data management platforms evolved, and data-driven decision-making expanded.

Key Features of Effective Supply Chain Management

Not all software solutions perform equally against these key capabilities. It’s important that you properly evaluate solutions before choosing one that is right for your organization and its supply chain operations.

The following features are essential when it comes to effective supply chain management. 

1. Automation: Automation increases efficiency by reducing the time it takes to complete routine, repetitive tasks. For example, supply chain management systems automate the workflow process ensuring data is consistent. Automation also helps reduce manual input mistakes and human delays while adding a layer of visibility for everyone in the system.
2. Reporting & Supply Chain Analytics: Any good supply chain management system helps the organization make better decisions. Doing so requires finding patterns and predicting results. Supply Chain Management solutions use large volumes of data to visually display the information in an actionable format. Reporting can also be automated ensuring that data stays consistent and up to date. 
3. Real-time data: Supply chain management systems leverage historical data to inform decisions, but the magic comes when combining historical data with real-time updates. As data and information are inputted into the system it is consistently updated and accessible across all teams.  
4. Network communication: The ability to combine data from within your organization, with that from your suppliers is required to truly optimize your supply chain. Working with reliable providers and ensuring they are fully integrated into your supply chain management system is essential for maintaining a robust supply chain network. Proper Information technology plays a crucial role in enabling real-time data sharing and communication across the supply chain. With adequate supply chain management tools companies can ensure that all supplier data is available to internal teams making overall operations smoother.
5. Global Reach: For most companies supply chains are large and complex and can span across nations and the globe. Managing a global supply chain requires robust systems that can handle international logistics, regulations, and market dynamics. That is why supply chain management solutions must look at data from across all stakeholders in the enterprise regardless of their location. Having a cloud-based online system enables teams across the globe to share learnings and best practices across plants.

Forecasting in Supply Chain Management 

Forecasting in supply chain management is a critical process that involves predicting future demand for products or services to optimize inventory levels, production schedules, and resource allocation. Effective demand planning and inventory management are thus integral to ensuring that these forecasts translate into optimal stock levels without overstocking leading to excess or understocking leading to shortages.

When forecasting is done right organizations can streamline operations, reduce costs, and increase customer satisfaction by ensuring products are available at the right time and with the right qualities. Accurately predicting customer demand is essential to align production schedules with market needs, minimizing overproduction and stockouts.

The overlap between forecasting and supply chain management solutions can be very powerful. Supply chain management solutions should be able to forecast by combining historical data, with known demand patterns to inform decision-making. With adequate forecasts, companies can predict what to expect during operations and optimize accordingly.

At its core, supply chain management forecasting takes two forms, quantitative analysis and qualitative analysis.

Quantitative analysis involves using historical data to form predictions about what will be needed in the future. As data accumulates and evolves in a system companies can look into ways they can further improve their business operations.  

While data-driven forecasting is an essential tool, one should not dismiss the power of qualitative insights. These are the observations, conversations, and other non-numerical information that powers human expertise.

Together these two types of forecasting can push companies to the next level when it comes to understanding their supply chain functionality. But in order to make this a reality, real-time, granular data is. Enterprise resource planning (ERP) systems are crucial for integrating various aspects of supply chain management, providing a unified platform for data analysis and decision support.

Why is Supply Chain Management Important?

Supply chain management isn’t just about moving products from point A to point B - it is a dynamic, multi-step process that can ultimately make or break an organization's operations. Integrating supply chain management within the broader business strategy ensures that operational goals are aligned with the company's long-term objectives.

The process of supply chain management involves the management of goods and information as they move from suppliers to consumers. Developing a cohesive supply chain strategy that aligns with organizational goals is fundamental to leveraging these management processes effectively. When done effectively, supply chain management has the power to unlock many benefits. 

For starters with access to data on entire supply chains organizations can implement better decision making. With more organized information and analysis, decision-making becomes strategic decisions that eliminate past mistakes.

Coupled with better decision-making comes increased profitability. The power of data-driven decision-making has a trickle-down effect related to predicting cost optimizations and revenue streams ultimately boosting the bottom line. As companies grow, leveraging economies of scale allows companies to reduce costs and improve efficiency by increasing production and lowering per-unit costs.

And with better decision-making and increased profitability comes a reduction of risks. Moreover, a well-managed supply chain provides a competitive advantage by enhancing operational efficiency and customer satisfaction. By diversifying suppliers and fostering clear communication channels, companies can navigate disruptions more smoothly, safeguarding their operations.  

With one key system visibility and collaboration are bolstered both internally and externally, ultimately creating an environment of both efficiency and innovation. As supply chains become more complex, keeping teams aligned and working together is essential for success.

Risk management is a less glamorized but still critical component of supply chain management, focusing on identifying, assessing, and mitigating potential risks that could disrupt operations. Effective supply chain risk management involves continuous monitoring of both internal processes and external factors such as market fluctuations, geopolitical events, and supplier stability. By implementing robust risk management strategies, companies can protect against uncertainties and ensure supply chain resilience.

Supply chain management can also assist organizations in meeting their sustainability goals. By harnessing data and specifications for supply chain management tools, organizations can uncover opportunities to reduce carbon emissions, eliminate waste, and use sustainable materials throughout their entire supply chain. Understanding the lifecycle of products allows companies to make informed decisions that enhance sustainability and product management.

Understanding the 7 Phases of Supply Chain Management

In its simplest form Supply Chain Management can be broken down into seven phases.

1. Planning: It’s easy to get lost in the day-to-day details of operations, but the most successful organizations take a longer-term planning view. By forecasting demand in advance, staffing, materials, and supplier details can be optimized. In order to plan ahead organizations must have access to data and specifications which takes an organized and accessible system. 
2. Sourcing: Strategic sourcing is an essential element when it comes to successful supply chain management. To drive profitability a host of factors need to be taken into account when selecting raw materials and part sources such as travel distance, quality rating, cost, and regulatory compliance. With the right supply chain management solutions all of these factors are optimized and accounted for. 
3. Procurement: The procurement process involves strategically selecting suppliers and negotiating contracts that ensure the availability of necessary materials without compromising on quality or cost-efficiency. This step is pivotal in aligning sourcing strategies with broader supply chain goals and ensuring a steady flow of materials in response to customer demand.
4. Pricing: Pricing strategies within supply chain management are critical for maintaining profitability while ensuring competitiveness in the market. This involves not only setting the right price points for end products but also negotiating favorable terms with suppliers to control costs. Pricing decisions must consider various factors, including production costs, market demand, competitor pricing, and overall economic conditions. 
5. Manufacturing: No matter how well an organization plans, during the manufacturing and production processes new uncertainties are always introduced. Supply chain management systems closely monitor product lines and inventory to predict changes that might be required, overall reducing risks during manufacturing. Once manufacturing is complete, the finished products are prepared for delivery and eventual sale, marking the transition from production to consumer availability.
6. Delivery: Once goods are produced, they must be delivered to end users or distribution centers. Optimizing the flow of goods from production to delivery ensures efficiency and reduces bottlenecks in the supply chain. Just like you want to optimize material supply and manufacturing timetables, you will benefit from optimizing delivery routes, truck loading, packaging, and more. With multiple complex SKUs, this can get very complicated which is why it is important to keep a detailed log of all product data and information. Proper Logistics management ensures that the strategies for moving and storing goods are efficient and cost-effective, with retailers playing a key role in the final stage of the supply chain, ensuring products reach consumers effectively.‍
7. Returns: No production line is perfect but good supply chain management optimizes returns for profitability. The importance of returns is often overlooked but is essential for profitability and customer satisfaction. Supply chain management tools optimize return processes by streamlining procedures for handling returns and facilitating quick and easy exchanges or refunds.

How Specright Improves Supply Chain Data Management

Managing complex supply chains is no easy task, although with the right supply chain data management tools companies are empowered to optimize for best practices. Supply chain professionals utilize these tools to orchestrate and streamline operations across diverse geographical and operational landscapes. With Specright companies can harness the power of data in a cloud-based, centralized system giving all team members supply chain visibility.

Critical specification data about products, packaging, supply details, and production are accessible across all teams with Specright, providing a comprehensive and real-time view of a company's supply chain ecosystem.

Whether it’s forecasting, planning, or sharing data with suppliers Specright’s Specification Data Management (SDM) platform has all the necessary tools to drive these initiatives forward. As supply chains grow increasingly complex, having a tool to streamline operations, mitigate risks, and enhance efficiency is crucial.  

To learn more, request a demo.