What are the components of effective supply chain management? (2024)

Resources What are the components of effective supply chain management?

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CleanChain Editorial team | Apr 24, 2023

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Effective supply chain management (SCM) is essential for any large international retailer. SCM is a complex discipline, drawing together elements of engineering, logistics, IT, and marketing to improve efficiencies and reduce costs.

A well-managed supply chain is more dynamic and flexible, better able to meet the changing needs of consumers and the wider market. It can allow brands and retailers to optimize their prices, improve the allocation of their inventory, and identify potential problems at an early stage.How can a brand or retailer improve its SCM? There is no catch-all solution that will work for every supply chain, but there are some broad principles that have been shown to result in SCM successes. CIO, the business magazine from Boston’s International Data group, have identifiedsix core components of good SCM: Planning, Sourcing, Making, Delivering, Returning, and Enabling.

Planning

In an ideal world, effective SCM would allow a brand to meet customer demand precisely, providing exactly as much product as consumers are interested in purchasing, at the times and places that they want to purchase it. Working towards this ambitious aim requires extensive planning. Each resource involved in manufacture must be made available in the right quantities, at the right times, in the right places. This planning must be built on a foundation of reliable data. Choosing which metrics to use to measure the efficiency and effectiveness of a supply chain can be one of the most important SCM decisions that a brand makes.

Sourcing

With data gathering underway and plans set out, brands must begin the process of selecting suppliers which are well positioned to bring those plans to fruition. This involves answering a number of questions. Is this supplier able to process materials in the quantity required to meet demand? Does that supplier have working connections to deliver their finished components to the product assembly site? Once the best candidates have been chosen, brands also need to be able to monitor their work and manage their brand-supplier relationship over time.

Making

Many different materials, components, and processes are involved in the manufacture of a product, and consequently, quality control is a central factor. Good SCM assesses the quality of raw materials before accepting them, implements processes to minimize errors on the production line, re-examines the quality of the final product and ensures that this quality will not be damaged during packing and shipping. Ensuring a high level of quality at every stage of manufacture not only results in satisfied customers, but also reduces the work that must be done further down the supply chain.

Delivering

The logistics of supplying products to consumers is highly complex and involves processing orders, scheduling delivery, dispatching loads, invoicing customers, receiving payments, and countless other minute tasks. Good SCM works to coordinate these different logistical elements as precisely as possible, to ensure rapid delivery and minimize overproduction. Most products manufactured today are distributed along a number of different routes to market. The same product may be sold in a company’s own stores, on its website, through other physical retail partners or via third party online retailers. Often this distribution will require outsourcing to haulage and delivery partners, increasing the need for careful monitoring and precise processes.

Returning

However effective a company’s SCM is, some challenges are unavoidable. Errors in quality control may result in defective products reaching the market. Shipping problems may create delays for the consumer. In the worst cases, large quantities of product may be damaged or lost, resulting in unfulfilled orders. Handling these problems is also a core part of SCM. A supply chain must be flexible enough to handle returns of defective products, address customer concerns about delays, and issue cancellations and refunds in a timely fashion where appropriate.

Enabling

At each stage of the manufacture and distribution process, there are a number of support systems at work behind the scenes that must also be managed: finance, HR, IT, facilities, portfolio management, product design, sales and quality assurance. Effective SCM involves building the connections required, within a company and externally, to ensure that these enablers are properly resourced and maintained.In modern SCM, one further key principle underpins all of these components: sustainability. As we enter a new decade, more and more companies are becoming aware that they cannot take real, impactful action to improve the sustainability of their operations without involving their supply chain. Discovering new ways to reduce waste, minimize energy use, and end the use of hazardous or carbon-intensive resources will be a growing focus of good SCM in the years to come.

CleanChain Editorial team

ADEC Innovations’ environmental, social, and governance (ESG) business advances sustainable practices around the world and helps organizations responsibly grow and operate

As an expert in supply chain management, it's evident that effective SCM is a critical factor for the success of any large international retailer. The article aptly captures the complexity of SCM, integrating elements from engineering, logistics, IT, and marketing to enhance efficiencies and cut down costs. Now, let's delve into the key components outlined in the article:

Planning:
- The article emphasizes the importance of meticulous planning in SCM. This involves aligning resources for manufacturing in the right quantities, at the right times, and in the right places.
- Reliable data forms the foundation for planning, and selecting appropriate metrics to measure efficiency is crucial.
Sourcing:
- Once the planning is in place, sourcing involves selecting suppliers capable of meeting demand and having the necessary connections to deliver components to the assembly site.
- Monitoring supplier work and managing relationships over time are critical aspects of effective sourcing.
Making:
- Quality control is a central focus during the manufacturing phase, involving the assessment of raw materials, minimizing errors on the production line, and ensuring the quality of the final product.
- Maintaining high-quality standards at every stage reduces downstream work in the supply chain.
Delivering:
- The logistics of delivering products to consumers is a complex process involving order processing, scheduling, dispatching, invoicing, and payment.
- Effective SCM coordinates these logistical elements precisely to ensure rapid delivery, minimize overproduction, and manage diverse distribution routes.
Returning:
- Challenges in SCM are inevitable, and handling product returns, addressing delays, and managing cancellations and refunds are crucial elements.
- A flexible supply chain is essential for managing unforeseen issues and maintaining customer satisfaction.
Enabling:
- Behind the scenes, support systems such as finance, HR, IT, facilities, and quality assurance play a vital role and must be managed effectively.
- Building connections within and outside the company is necessary to ensure these enablers are well-resourced and maintained.

Additionally, the article highlights the overarching principle of sustainability in modern SCM. As we move into a new decade, companies are increasingly recognizing the need to integrate sustainability into their operations, requiring SCM to focus on reducing waste, minimizing energy use, and adopting environmentally responsible practices.

In summary, the six core components of effective supply chain management—Planning, Sourcing, Making, Delivering, Returning, and Enabling—underscore the multifaceted nature of SCM and the need for a comprehensive and flexible approach to meet the challenges of the dynamic market.