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What is Supply Chain Management Process in 2024

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27th Jun, 2023
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What is Supply Chain Management Process in 2024

Introduction

The world supply chain has been disturbed since the break out of covid-19 pandemic. We all have heard that due to disturbances in the world, supply chains, prices, and the supply of various essential commodities and services are affected. The world just came out of the pandemic, but some effects can still be seen in the supply chain. The supply chain industry in 2021 saw the Ever Given crisis, Which resulted in the blockage of the Suez Canal for about 6 days and a wave of panic passed through the Supply chain industry. Many of us don’t know the exact meaning of supply chain management or supply chain process.

What is Supply Chain Management or Supply Chain Process?

Supply chain management is defined as the process of designing, planning, organizing, and exercising control over the logistics and allied activities which aids in the correct flow of goods and services to achieve efficient and effective movements of required resources. It consists of the entire network of organizations, processes and people who care is the movement to make available goods at the right place at the right time to achieve the desired goal.

Supply chain management (SCM) is collecting, organizing, executing, and achieving the supply of raw material to the production place to end consumer smoothly without any or least hassle and in the most cost-efficient manner. 

When you order goods online For example say a jacket, the Supply chain starts from then and there of your order till the delivery of the jacket at your doorstep. This involves confirming orders from the seller merchant, taking delivery from the seller to the distribution center, and transferring that to your nearest distribution center and from that to your doorstep. There are plenty of activities other than this which run parallel like packaging, tracking of the package, and condition and safety of the goods.

Supply chain management optimizes the flow of material, information, and manpower in the key areas of production and distribution.

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What is Supply Chain Management Process?

SCM processes are the building blocks for modern business. When it comes to key assets or highly valuable goods it is of more importance. SMC process involves various processes that are designed to tackle specific problems. The components of Supply chain management are:-

Strategic Planning Process

Strategic Planning Process is the process of strategizing and leveraging existing technology and resources available to have maximum benefit from the customized SCOR model that is designed. Strategic Supply Chain Design is made by evaluating and optimizing existing models of a supply chain in the planning such as the score model. Every small movement is studied to reduce the efforts and resources and maximize efficiency. Attention to detail and future projection is kept in mind while crafting the strategies.

Strategic planning helps to identify the set of core suppliers and vendors with whom to create a enhance the relationships and to fully utilize their potential. 

Demand Planning Process

Demand Planning involves Forecasting, Lifecycle, Promotion, and Consensus Demand Planning.

  • Forecasting future demand is done based on evidence such as historical data prospects, emerging trends, and other relevant data and analysis. Statistics methods can be used to better prediction of demand trends.
  • Lifecycle Planning is purely based on forecasting the life cycle of a product from its launch of a product to its maturity and discontinuation. This encourages firms to stay relevant and keep innovating to compete in the industry. 
  • Promotion planning is the promotion plan of a product to achieve the forecasted target. It also includes other special events apart from the plane.

Supply Planning Process

The supply Planning Process involves stock planning, Outsourcing, Distribution Planning, and Collaboration. Stock planning is the bare minimum supply of raw materials or the stock that should be ready to be used in the production process. This safety stock is determined by multiple factors reasons such as supply irregularity, future projection on price or supply, etc.

The outsourcing process is completely outsourcing the production process to a third party. For example, Apple has outsourced its manufacturing or assembly to Asian countries such as chins, India, and Japan.

  • Distribution Planning is the planning of both short-term and long-term distribution of available resources
  • Supplier Collaboration helps receive demand and stock updates more frequently for performing manufacturing tasks.

Procurement Process

The procurement process is sourcing and acquiring correct materials and services from suppliers. The procurement process includes Order Processing, Receiving Order Confirmation, and Invoice Verification. Order Processing helps in direct procurement from the source or the firm that issues the goods with the order confirmation. At this stage market analysis and price negotiation is conducted to get the best deal at the best price with favourable condition.

Receiving Order Confirmation is confirming the received goods with other departments and checking the quality of the goods received. The invoice verification process is the verification of goods received with the purchase invoice. This prevents any loss of product in transportation and to know the exact price of the goods.

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Manufacturing Process

At this stage, the raw material gets transformed into a completely new product. This is a crucial stage of production where quality control, optimization of the manufacturing process, and improving efficiency and cost efficiency are looked after. Manufacturing Process involves Production Planning and production Execution.

Production planning means planning the production process or scheduling the production process. Which includes the decision to choose the right type of machinery for production, method of production, factory layout, stages of manufacturing, etc. These decisions help in controlling the cost of production, reducing the bulk movements of goods, and productivity. After these important decisions are undertaken, Production Execution takes place. This stage is where the real transformation of raw material takes place and convert into finished goods.

Warehousing Process

The warehousing Process involves the Process of keeping a record of all the stored goods, maintaining their track record, and storing them in desired condition for their longevity. When a product enters the warehouse it should be stored for a minimum period so that the cost of storing goods should be minimum to the company. Warehousing includes inbound Processing, Outbound Processing, and Physical Inventory management.

  • Inbound Processing involves all those steps essential for external procurement that is necessary for the procurement of goods.
  • Outbound Processing makes them ready for shipping. 
  • Physical Inventory management is all those support activities that regulate the flow of goods to the production space at the correct time.

Order Fulfillment Process

When the goods are produced and sold the outflow of those goods is looked at under Order Fulfillment Process. This step involves the process of Sale Order Processing and Billing Process. 

  • Sales order processing allows maintaining the outward flow of goods at the desired time while recording the pricing, shipment, order entry, etc.
  • The billing process is issuing the correct bill and recording incoming payments.

Transportation Process

The transportation Process involves planning, executing, and costing the freight process. After the goods are ready to be transported. Transportation Planning is the process of making a plane with the least financial cost and time-consuming transportation. Transportation Execution is executing the plan that is created. the practicality of the pan is necessary for achieving efficiency. 

The freight Costing process helps in calculating the freight cost. 

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Conclusion:

Supply chain management is the key factor that affects the business’s health both in terms of financial and manpower resources. Correct supply chain management helps a business to flourish and grow, on the contrary, a poor SCM process can have repercussions on business health. In the past, there are plenty of examples in which poor SCM completely drained the business resources. So SCOR model supply chain is the lifeline of any business and needs due diligence.

The best way to capitalize on this opportunity is to enroll in a certification program such as upGrad’s Global Master Certificate in Integrated Supply Chain Management.

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Frequently Asked Questions (FAQs)

1How does supply chain management improve customer service?

SME services such as product return or order cancellation on online shopping, and reverse logistics service which means bringing back a product into the supply chain from the customer for its further movement. These minute details improve customer service.

2What is the meaning of Reverse logistics?

Reverse logistics means pulling back products from consumers back to the supply chain at allocate them to other consumers. Reverse logistics examples include, when we return/cancel any online order the product goes back into the supply chain and further gets delivered to another consumer.

3What is the role of supply chain management in an organization?

The growth of an organization is responsible for Supply chain management. This helps to reduce the cost and improve the efficiency and effectiveness of the business activities and ultimately leading to business growth.

4What are the benefits of effective supply chain management?

Effective supply chain management helps businesses to grow cost-effectively. This makes it possible to achieve cost efficiency even when others are burning cash.

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