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Basic Components of Supply Chain Management

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29th Jun, 2023
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Basic Components of Supply Chain Management

Supply chain management covers every aspect of a product’s lifecycle, right from obtaining its raw materials to delivering a full-fledged product made out of it to customers. A supply chain is made out of diverse, interconnected businesses offering assistance on various stages of the chain. Although these businesses vary in nature and primary functions, they all combine to form a uniform chain to develop products and deliver them to customers. Elements of supply chain management work on conceptual models to stabilise the entire process. However, a large part of it relies entirely on practicality to adhere to market demands and customer expectations.

The fluctuating supply chain market frequently faces disruptions and varying challenges that can be overcome using the right set of supply chain strategies. Yet, what stays the same are the basics of supply chain management. The fundamental components of the supply chain account for its most significant features creating the foundation of the entire management for businesses to work and thrive with time. 

One of the most critical factors of supply chain management is to devise strategies that promise customer satisfaction and a good profit margin. To achieve both of these objectives, it is pivotal to understand and leverage all the core components of supply chain management.

Here are the five components of supply chain management.

Planning

The first process of supply chain management is planning. Creating a blueprint before initiating any process is imperative, so planning out supply chain management at every unit is necessary for a smooth project compilation. Planning requires leading figures to leverage analytical data, available resources, and customer expectations around the product to roll out a detailed plan for a smooth, successful production. Planning keeps account of cash flow and resources to maximise restricted assets for optimised operation. Moreover, it solves product, logistic, and distribution-based issues. 

Sourcing

Sourcing refers to identifying suppliers and vendors to source raw materials and services. It is the most crucial step of supply chain management as cost-effective practices can be applied here for overall efficiency economically. The step requires management to seek out reliable suppliers offering high-quality material compliant with the budget restrictions and delivery at the stipulated time. An inefficient supplier is more than likely to cause harm to the entire supply chain. Being connected to one another, each element makes it significant to seek reliable vendors for sourcing materials. A company must explore all options before seeking out the best in the industry.

Production

After sourcing the essentials of the product, the next crucial step is production. Production includes all the processes required to transform supplied raw materials into the final product. This part of the supply chain incorporates procedures such as assembling, testing, packaging and the final assembly to deliver it among distributors. Various factors may influence the production line, such as a delay in sourcing materials, quality of the materials, and customer feedback, which may help improve or make other changes in the production. The production looks over the key features of any product that includes its conformity with established industry standards and the amount of product being produced in the supply chain.

Delivery

Delivery of the product goes through several steps from manufacturing centres, including storage in warehouses, distribution among local retailers, or supply through diverse channels such as e-commerce portals to reach its recipient. Timely transportation is crucial at every stage of supply chain management, but the delivery of products at the right time demands extra vigilance with time restrictions. Companies leverage air, rail or road transportation mediums to have seamless delivery of products to local retailers. Another crucial aspect of delivery besides time is zero damage. Transportation can inflict significant damages on products if the containing material is not secured vigilantly. Hence, an added aspect of this supply chain component is to ensure product safety by all means. 

Return

This component deals with post-delivery customer services, a crucial part of customer service. Suppose customers receive a damaged or malfunctioning product. In that case, manufacturers must take care of it either by repairing, or most likely, replacing it with a new product. Customer satisfaction is the driving force for supply management chains to run. Imagine an unhappy customer leaving unsatisfactory comments for your brand. Not only do you lose this one customer, but hundreds of others who access those comments. The return or reverse logistics ensure good customer relations and a good brand reputation in the long run. A reliable supply chain management processes multiple such requests in advance without affecting the production line.

Importance of Supply Chain Management Components

Basic components of supply chain management draw a massive impact on the production following which, any business can boost their productivity and profitability. It divides the whole supply chain process into five parts to bring value out, each with stern vigilance and quality checks on each of them. A successful supply chain management system requires each element to work efficiently towards customer satisfaction. These five components prepare a blueprint for the processes to comply and create a stellar system while generating optimal profitability.

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A career in Supply Chain Management

In 2020, the projected global supply chain market was valued at 15.85 billion U.S. dollars, and by 2026, it is expected to reach a market value of 31 billion U.S. dollars. So imagine the market opportunity it will offer to supply chain management career seekers. 

Being an interdisciplinary field, supply chain management offers immense opportunities for learners from diverse courses. As long as applicants are skilled with the required expertise, supply chain management has a place for everyone. Along with an undergraduate degree, masters in the relevant discipline gives you an edge over other candidates to bag attractive opportunities in the supply chain management field. Experience and added certifications also contribute to increased chances of getting hired. If you are looking for supply chain management certifications from leading educational institutions, then upGrad has your back!

upGrad offers a Global Master Certificate in Integrated Supply Chain Management provided by the leading Michigan State University. The course is equipped with best-in-class content to equip learners with an industry-ready course structure. The program aims to educate learners with brilliant supply chain management practices to introduce cost-effective strategies delivering operational excellence through all the supply chain stages. 

With a learner base of 40,000+ students across 85+ nations, upGrad extends educational services explicitly created to prepare learners for the industry. Along with an official certificate from the leading universities at course completion, the platform also extends features such as career guidance, 24/7 student support, industry network, interactive discussion, and international academic support to fuel your dreams with the proper guidance.

Technology for Improved Supply Chain Management

The evolution of the latest technologies can help with the smooth operation of the basic components of supply chain management. The key technologies revolutionizing the field of supply chain management are as follows:

  • IoT

IoT involves combining physical objects like software, electronics, and sensors with internet-powered data transfer and collection. It supports real-time communication, enabling the initiation of physical systems without human intervention. IoT helps with the digitization of supply chains, leading to fully-integrated ecosystems. These connected supply chains are completely transparent to the manufacturing, product development, distribution, and marketing departments. 

  • Big Data and Advanced Analytics

The Internet of Things has increased the amount of data that businesses have to evaluate every day. Big data and advanced analytics provide better insights into supply chain operations. Therefore, businesses are able to detect inefficiencies and make improvements. 

Several techniques for data analytics have been automated into mechanical algorithms and processes to work on data for human consumption. It enables organizations to make informed decisions and risk management efforts in their supply chain operations.  

  • Robotic Process Automation

Robotic Process Automation can be incorporated into different components of supply chain management for faster and more accurate operations. Robots are better than manual laborers in terms of productivity and uptime. But robots won’t replace human workers and instead enable supply chain managers to improve inefficiencies across the supply chain with the help of automation. 

Automation will become more popular as businesses focus on satisfying the requirements of omnichannel supply chains. Automating different aspects of supply chain management will lead to greater agility and flexibility. Some warehouse activities like sorting, counting, and transporting items can be easily automated with the help of robots. 

Some large supply chain organizations are focused on leveraging self-driven cars to minimize labor expenses. It will also contribute to fuel economy and reduce the possibility of human harm on the road. All these efforts across the supply chain will contribute to greater ROIs for businesses.  

  • Artificial Intelligence

Artificial intelligence is the driving force behind automating different elements of supply chain management. AI, with the help of machine learning, makes businesses more proactive in responding to demand changes. For instance, supply chain managers use AI-based forecasting tools to plan different operations and detect cost-saving opportunities. 

Artificial intelligence tools also support real-time reporting and various interactive data visualization techniques. Advanced algorithms based on machine learning and predictive analysis are used to improve planning and decision support systems, automate time-consuming warehousing operations, and identify buying patterns. 

  • Blockchain 

Blockchain is considerably improving how retailers and consumer-packaged goods manufacturers are operating their supply chains. Blockchain is solving the need for securing supply chain operations. Blockchain networks are powerful for improving supply chains that lack transparency and traceability. 

They come with a decentralized and secure database to store all transactions across the supply chain. It enables real-time tracking and traceability of products with regular updates. Therefore, blockchain technology supports the transparent tracking of goods while reducing the risk of errors and fraudulent activities. 

Conclusion

The changing trends of the customer service market have drastically affected supply chain management. Yet, the essential components of the supply chain are indispensable. The five elements of supply chain management verify production quality at every stage, working towards efficiency, cost-effective practices and complete optimisation of participating resources. These are the essentials market leaders look up to curate winning supply chain strategies. 

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Sandeep Pereira

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Responsible for working with the various teams and other management to establish long-range goals, strategies, plans and policies and set up new programs at upGrad. With a demonstrated history of working in the EdTech industry.
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Frequently Asked Questions (FAQs)

1What are the core objectives of supply chain management?

Supply chain management is driven to manufacture products and services through a line of interconnected processes, though they all work in alliance to fulfil three objectives. These objectives include producing at economical rates while keeping profit margins under consideration, improving overall efficiency, and ensuring customer satisfaction through product quality and quick delivery.

2What is the role of logistics in supply chain management?

Logistics management incorporates all transportation elements of the supply chain, right from bringing raw materials from the supplying vendor to delivering compiled products across distributors and local retailers to reach customers. Logistics also include the ‘reverse logistics’ part, which ensures customer satisfaction by returning the damaged product and replacing it with a brand new product.

3What skills are required to make a career in supply chain management?

upply chain management is a lucrative career for anyone looking for better opportunities in the customer service field. Along with an undergraduate degree in the relevant discipline, there are multiple other skills required to make it big in the field. These skills include: Business ethics Cost Accounting skills Risk Assessment Project management Technical Understanding Economics and Market Dynamics

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