The term ‘supply chain management’ first came into the picture in 1982, when Keith Oliver coined it. However, supply chain management has existed in practice long before that. The only way to successfully sell large quantities involves efficient supply chain management.
With modern technology, AI, and various software tools, business owners find managing their supply chains increasingly simpler. Nevertheless, one must be aware of the different components of supply chain management in order to simplify and streamline their supply chain operations.
Let us dive into the world of supply chain and dissect each component of the supply chain to understand its functioning.
Understanding Supply Chain Management: Definition and Objectives
Essentially, supply chain management refers to the handling of all the processes involved in transforming raw materials into finished products and, subsequently, selling them. Supply chain management impacts other facets of businesses, such as financial management, operating costs, customer satisfaction, and more.
The key objectives of supply chain management are:
- Improving efficiency
- Optimising logistics
- Improving customer satisfaction
- Cutting down unnecessary costs
- Improving distribution
- Co-ordinating the overall business
Six Components of Supply Chain Management
While there are several different models of supply chain management, the most common one is the Supply Chain Operations Reference or SCOR model. This model has six components that are as follows:
- Planning: The first and most crucial component in supply chain management is planning. One of the first things an entrepreneur would need to plan is how to make their product, domestically or internationally. Furthermore, this is also the time to decide whether you want to make each part of your product yourself or whether it would be more sensible to purchase some components from a third party.
Additionally, planning will also require you to decide how you will produce and store your products. This means you should have a clear layout of whether you want to make and store your products beforehand or make them as you get orders.
- Sourcing: Once you are done planning, you will be moving on to the sourcing phase of your supply chain management. This is where business owners should reach out to potential vendors, verify the quality of raw materials, get the best-quoted price possible, and subsequently buy them. It is also essential to ensure all your raw materials are delivered on time.
In addition, remember to assess and vet your suppliers continually for optimal supply chain management operations.
- Location: Location plays a very critical role in supply chain management. For example, if you own a beverage company, your manufacturing plant should not be established in a location with water scarcity. Therefore, set up your manufacturing unit based on the needs and requirements of your raw materials and finished products.
- Making: Once the previous three steps are fulfilled correctly, you will move on to making your goods. This stage involves assembling, testing, and packing of finished products. You can incorporate customer feedback at this stage to ensure your products are up to the mark.
- Delivering: Now, we enter into the logistics part of supply chain management. Apart from ensuring your goods reach your customers, this phase also involves processing orders, warehousing, and inventory management. A major part of the success of a company depends on this stage, and hence, you should put special efforts into ensuring a smooth delivery process.
Some of the best delivery practices include automated inventory management, large warehousing networks, delivery fulfilment using air, sea, and road, and so on.
- Returns: While returns may seem to have a negative impact on your business, in reality, how you handle your returns and improve your products based on that will attract more buyers to your company. Therefore, make sure to create a simple and easy returns process that does not feel like a hassle to your buyers.
Furthermore, you should have efficient reverse logistics in place to ensure your goods are picked up on time and returned to your warehouse for further inspection or processing. Other elements of the returns process are:
- Identifying the condition of the returned product
- Authorising the return
- Scheduling a replacement
- Processing refunds
Importance of Understanding Supply Chain Management for Growth
Needless to say, supply chain management is one of the most important aspects of businesses that help entrepreneurs to scale up while saving costs and offering high-standard services and products. Even though supply chain management might sound simple, it has a ton of intricacies, all of which need to be taken care of in order to get the best results.
In this regard, we recommend enrolling in the IIT Supply Chain Management Course, taught by esteemed faculty members at IIT Roorkee and offered by Imarticus.
This online course covers all the basics in addition to the components of supply chain management. Furthermore, you will also be able to learn coding languages and software tools like Python, Excel, and Tora. At the end of the course, you will get a certification from IIT Roorkee, which will further boost your portfolio and help you better manage your own business supply chain operations or establish yourself as an expert in this field.