Supply chain management (SCM) refers to the process of handling the flow of goods and services from their source to their destination. It includes all the processes, activities, and resources that transform raw materials into finished products for delivery to the end consumer.
Supply chain management coordinates and integrates the product flow, information flow, and flow of finances across the different stages of the supply chain within and among companies. The critical elements of SCM include planning and forecasting, purchase, product assembly, movement, storage, distribution, sales, returns, and customer service.
SCM actively streamlines a business's supply-side activities to reduce the time-to-market and deliver products to customers more efficiently while gaining a sustainable competitive edge in the market. Careful supply chain management can benefit businesses by reducing costs, increasing revenues and delivering products faster, better and cheaper.
When done right, supply chain management enables businesses to navigate market demands optimally and cater to customer expectations. Whether operating globally or locally, no company dealing with a supply chain can sustain itself without efficient SCM.
Let’s understand why supply chain management is vital to businesses:
The supply chain forms an integral part of a business, and visibility into it has far-reaching consequences on business success. A lack of synchronisation and coordination in the workflow is often the result of the workforce's poor understanding of the activities beyond their own position in the supply chain.
It not only leads to reduced employee performance but also impacts the efficiency and productivity of the production process. SCM increases the transparency and visibility across every stage of the supply chain, helping employees across various departments communicate, collaborate and work in sync.
A proper supply chain management system helps reduce operating costs by cutting down on purchasing costs, production costs and the total supply chain cost. Through efficient SCM, retailers can reduce purchasing costs by quickly distributing expensive products and eliminating holding costly inventory. Likewise, manufacturers can rely on efficient SCM to ensure reliable materials delivery to assembly plants and avoid any material shortage that could hike production costs. A proper SCM system helps manufacturers and retailers reduce the total supply chain cost while meeting customer service goals.
Customers expect that they get the correct products delivered to them in the shortest possible time and at the correct location. Not just timely delivery, customers also expect quick and efficient after-sales service with a minimal waiting time. While it may seem impossible, proper supply chain management is the key to stellar customer service, from timely delivery to efficient after-sales support. With a proper supply chain management system, businesses can have sufficient inventory in the correct warehouse location to ensure speedy product delivery to customers. SCM will also ensure prompt customer support or quick replacement of defective products.
Most importantly, proper supply chain management improves a business's financial position. With decreased supply chain expenditures, firms can dramatically increase their profit margins in the long run. Moreover, supply chain management minimises using bulky fixed assets such as warehouses, plants, vehicles and other expensive infrastructure. SCM helps redesign the entire supply chain network with optimum resource utilisation while maintaining product standards and speeding up product flows to customers. Thus, it helps increase the cash flow since firms take lesser time to make and deliver products to the customer’s doorstep.
A firm must first understand the objectives and purpose of supply chain management before it works its way into developing SCM strategies. Below we discuss the five main goals of supply chain management that a business must consider:
At its core, the objective of SCM is to ensure that inventory is readily available to meet dynamic consumer demands. Matching supply and demand is crucial, and supply chain professionals must be equipped to collaborate and standardise processes to achieve maximum resource productivity and eliminate duplication of effort. With inventory levels at par with market demands, firms can reduce waste, minimise expenses, and boost supply chain efficiency.
The business landscape is ever-volatile, with numerous market factors influencing how companies function and survive. Such volatility calls for the ability to adapt to change and survive the challenges of changing customer expectations, economic crises and globalisation. Hence, one of the primary goals of investing in SCM innovations is to create the groundwork for a company to scale up or down its operations in response to abrupt changes and make supply chains resilient to interruptions.
The very reason supply chains exist is the customer - the lifeline of every business. Therefore, one of the basic objectives of a supply chain management system is to create value for the customer constantly. Creating and increasing customer value involves developing market-driven strategies based on a sound understanding of customer expectations and demands. It also applies to developing SCM approaches and capabilities to achieve higher quality customer service.
One of the fundamental objectives of managing the supply chain is to improve a company’s financial performance. While traditional cost-cutting approaches typically focus on optimising inventory levels and fulfilment automation to reduce carrying, freight and labour costs, modern SCM emphasises both cost control and profit generation. Firms today apply SCM strategies to daily operations to maximise competitive advantage through increased differentiation, market penetration and sales.
Effective SCM requires simultaneous improvements in the internal supply chain operations and customer service. On the one hand, internal supply chain efficiency means a company can effectively lower its operating and sales costs while getting an attractive ROI on inventory and assets. On the contrary, good customer service typically entails higher order fulfilment rates, on-time deliveries, and a low rate of product returns.
Although market demands and operating challenges differ with supply chains, the fundamental concepts of SCM are more or less the same and require action in five core areas. The sum of these actions determines how a company optimises its SCM and the effectiveness and capability of its supply chain management system.
Production | Creating master production plans considering plant capacities, equipment maintenance, workload balancing and quality control. It essentially answers the following questions:
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Inventory | In a supply chain, inventory serves as a buffer or safety net against uncertainty and abrupt demand shifts. Since inventory holding can be costly, the goal is to identify reorder points and maintain optimal inventory levels. It addresses the following concerns:
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Location | The location of production and storage facilities determines the possible routes available for products to flow from their source to the final consumer. This concept of SCM addresses these concerns:
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Transportation | Inventory movement from one supply chain location to another must be reliable and inexpensive with as low transit time as possible. Essential considerations in this area include:
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Information | Efficient coordination and informed decision-making in SCM depend on the timely availability and accuracy of information. Thus, a company must decide:
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Supply chain management is a critical business aspect across organisations of all types, from manufacturing, retail and transportation companies to service firms, third-party logistics and government agencies. Overall, SCM has seven core functional areas, and these are:
1. Demand planning - The process of forecasting market or customer demand using informed speculations, current test market data, statistical techniques, historical sales data and other quantitative methods. Demand planning assists companies in entering new markets, inventory management, production planning and evaluating future capacity concerns.
2. Purchasing - A company acquires goods and services to maintain the flow of input, maintain the standard and value of its products, strengthen its competitive position and reduce inventory holding costs. Purchasing in SCM implies getting the right quality in the correct quantity for the right price and at the right time.
3. Manufacturing - Manufacturing refers to producing goods for sale or use as raw materials involving tools, machines, equipment, labour, processing and other activities. While the term may include anything from manually-produced goods to high-tech production, manufacturing in the supply chain context typically refers to the large-scale industrial process of converting raw materials to finished goods.
4. Warehousing - In supply chain management, warehousing refers to the physical storage of inventory for distribution or sale. Almost every type of business uses warehousing facilities to temporarily store inventory before shipping them to individual customers or in bulk to other locations.
5. Inventory management - A critical element of the supply chain and SCM, the goal of inventory management is to have the right products at the right place and at the right time. Inventory management involves purchasing inventory, storing inventory until ready for shipment and pulling finished goods to fulfil orders.
6. Transportation - In a supply chain, transportation refers to the movement of goods from one location to another. It usually begins at the source of the supply chain with raw materials making their way to production/manufacturing plants, the subsequent movement of finished goods to warehouses and all the way to the customer’s doorstep.
7. Customer service - Another critical area where supply chain management is used is customer service. Enhancing supply chain operations with efficient customer service helps companies meet and even surpass customer expectations. Since a supply chain ends with a product reaching the customer, data from the customer service team is the key to addressing consumers' pain points and demands.
A supply chain management framework essentially refers to the dominating concepts and themes within SCM used for understanding and explaining the term. Here we will briefly discuss one of the most well-known supply chain management frameworks - the Supply Chain Operations Reference (SCOR) Model.
The SCOR model was developed by the globally-recognised non-profit organisation Supply Chain Council to assist SCM functions through practical guidelines for analysing supply chain management practices. The model is based on five main components - ‘Plan,’ ‘Source,’ ‘Make,’ ‘Deliver’, and ‘Return,’ representing the inter-related business processes in a typical product lifecycle. These five integrated processes must align with the firm’s organisational strategy, material and information flow. One of the primary applications of the SCOR model is to improve supply chain processes.
A supply chain management system typically aims to implement centralised control over the production, distribution and shipment of goods and services from the source to the final destination. SCM improves productivity and makes production processes more efficient, directly impacting the company’s bottom line.
Let’s understand SCM in the context of the following components:
While logistics management is a small part of the supply chain management, the latter is more comprehensive, dealing with the planning, sourcing, production, delivery and returns handling. On the other hand, logistics focuses on getting the right products to the right place and at the right time.
In a way, SCM is an improvement over logistics. Yet, the confusion between logistics and supply chain management is not new. So, let’s break down the fundamental differences between the two.
Logistics | Supply Chain Management |
(a) The concept originates in the military and dates back to the 19th century. | (a) A relatively modern concept that originated in the 20th century. |
(b) Involves specific activities in the supply chain management process. | (b) A broader term encompassing planning, procurement, manufacturing and delivery. |
( c ) The focus is on meeting customer expectations and demands. | ( c ) Emphasises creating a competitive advantage for the business. |
(d) Logistics activities are directed towards the cost-effective and efficient delivery of goods to customers. | (d) Activities in SCM control the conversion of raw materials into finished goods and their movement from the supplier —> producer —> warehouse —> retailers/consumers. |
Knowing how to optimise and improve supply chain management can be challenging for small and established businesses. As demand increases, you must amp up your supply chain management efforts to increase efficiency.
Let’s look at five best practices to improve supply chain management:
Increasing your visibility over supply chain processes is the first step to improving SCM capabilities. The most practical way to go about this is to adopt inventory management strategies that enable real-time tracking of inventory levels at every stage of the supply chain.
Automation plays a decisive role in maximising the efficiency of supply chain operations. From robotics and artificial intelligence to radio-frequency identification (RFID) technology, automation is one of the biggest technological advancements that can speed up supply chain operations and improve productivity.
Effective supply chain management depends a great deal on the standardisation of processes. There are several ways to implement standardisation while increasing control and transparency, such as adopting warehouse management systems (WMS), ticketing systems, transportation management systems and enterprise resource planning (ERP).
Developing good relationships with your vendors or suppliers can help you plan better and avoid any delays or shortages in the supply chain. While it is crucial to identify dependable suppliers consistent in their performance and delivery, it is necessary to weed out suppliers that slow down your operations.
For a manufacturer, value chain management (VCM) involves monitoring and managing various manufacturing components, such as procurement, production, quality control and distribution. Organised VCM is essential to maximise revenue, optimise business operations and strengthen supply chain management.
The supply chain typically comprises seven components: planning, sourcing, inventory, production, information, transportation and return.
1. Planning | Every aspect of the supply chain requires careful planning, from the supply of materials to manufacturing, storage and delivery. |
2. Sourcing | Sourcing means purchasing raw materials from a supplier and ensuring that their quality and price are acceptable. |
3. Inventory | A crucial element of the supply chain, inventory refers to all the items a company stocks and includes raw materials, semi-finished and finished goods and other materials. |
4. Production | It is the stage where the raw materials are transformed into finished goods. Production depends on other supply chain elements like sourcing, market demand and inventory. |
5. Information | Proper flow of information is a vital component of supply chains and is bidirectional, moving from the supplier to the consumer and vice versa. |
6. Transportation | Transportation is another critical element that refers to the point-to-point movement of raw materials and finished goods within the supply chain. |
7. Return | Meeting customer demands is not enough when you have poor customer service. Handling returns forms the last leg of the upply chain and is key to sustaining customer loyalty. |
Now that we have discussed the key supply chain processes, let’s briefly go thoroughly the five-step process of effective supply chain management:
1. Plan | Planning is the strategic part of SCM that outlines the key factors and metrics involved in the fulfilment of the objectives of the SCM process. |
2. Source | This stage focuses on identifying the most reliable suppliers for sourcing raw materials so that the supply chain faces no disruption. |
3. Execute | The execution stage involves the implementation of the existing plan in the form of finished products ready for testing and delivery. |
4. Deliver | The delivery stage is where the right quantity of product/service reaches the right place and at the right time. |
5. Return | Returns handling involves review and quality check of returned products while also helping in inventory management. |
Technology enables more connectivity, increases access to information, improves data analytics, and provides more streamlined storage. It has changed supply chains for the better and strengthened organisations with manifold benefits.
Let’s look at how technology is a blessing for logistics and supply chain management:
1. Better access to information
Supply chain technology facilitates data connectivity and eliminates information silos among various supply chain players. Improved access to information drives communication, promotes visibility and minimises inefficiencies.
2. Increased insight
Supply chain technology facilitates data-driven decision-making through improved insights. These decisions, directly and indirectly, impact the supply chain's overall performance and productivity.
3. Improved agility
Addressing problems and developing solutions are much faster when executives and supply chain managers have better insights into the supply chain processes and systems. It is a crucial capability in today’s fast-paced business environment.
4. Better collaboration
Technology helps organisations coordinate better between individuals and departments. A highly competitive and technology-enabled supply chain with network-wide collaboration is more agile and reactive towards omnichannel consumer demands.
5. Enhanced customer experience
Technology is crucial to meet changing customer demands, especially in the digital age when customers are more informed than ever. The agility, accuracy and visibility supply chain technology provides go on to enhance the customer experience.
If you’re aspiring to build a career in supply chain management or related fields, an MBA in Logistics and Supply Chain Management is a great option.
The semester-wide syllabus of an MBA in Logistics and Supply Chain Management is given in the table below:
Semester I | Semester III |
Principles and Practices of Management | Distribution Management for Global Supply Chain |
Managerial Economics | Enterprise Resource Planning |
Business Statistics and Quantitative Techniques | Applied GIS and Spatial Data Analytics |
Business Communication | International Logistics and Management |
Financial Reporting, Statements and Analysis | Port and Airport Management for Logistics |
Public Private Partnership And Port Development | Elective 3 |
International Trade Procedures and Documentation | Elective 4 |
- | Elective 5 |
- | Internship |
Semester II | Semester IV |
Global Environment of Business | Containerisation and Multimodal Transport |
Fundamentals of Logistics and Supply Chain Management | Supply Chain Risk Modelling and Management |
Procurement, Storage and Warehouse Management | Elective 6 |
Financial Management | Elective 7 |
Human Resources Management | Final Research Project and Viva |
Production and Operations Management | Comprehensive Viva Voce |
Elective 1 | - |
Elective 2 | - |
According to MarketsandMarkets Research, the global supply chain management market size is forecasted to grow from USD 28.9 billion in 2022 to USD 45.2 billion by 2027 at a CAGR of 9.4%. The remarkable growth in retail and e-commerce and the demand for increased visibility into supply chain processes have been cited as the key drivers of the market growth.
If we go by Google Trends, the search volume for the keyword “Supply Chain Management Course” in India has seen an overall upward trend in the past five years. Business survival largely depends on efficient supply chain management as much as it does on addressing infrastructural limitations like costly raw materials and labour, incompetent professionals, poor risk management and inadequate technical support. As the country’s economy recovers from the damages of the COVID-19 pandemic, it is more important than ever to strengthen the supply chain infrastructure.
With evolving customer expectations and a volatile market, effective SCM is the key to balancing demand and supply in the economy. Since SCM has a broad scope encompassing manufacturing, warehousing, IT, logistics, transportation and other aspects, it creates numerous job opportunities across many sectors. The job roles are not only diverse but also rewarding, with ample growth opportunities.
The growing scope of SCM in India is primarily due to the burgeoning global players in the Indian market, rapidly expanding product variety, ever-changing customer expectations and the digital revolution. It implies higher demand for supply chain management professionals across industries and a simultaneous rage for courses offering supply chain management certification.
The average pay of a Supply Chain Specialist in India primarily depends on the candidate’s experience, skill set and job location (city).
City-wise salary
INR 520,523 | |
INR 771,390 | |
INR 625,631 | |
INR 420,000 | |
INR 727,610 | |
INR 550,000 |
Experience-wise salary
INR 484,333 | |
INR 698,384 | |
INR 1,048,047 | |
INR 1,200,000 |
Skill-wise salary
INR 638,713 | |
INR 700,000 | |
INR 650,000 | |
INR 517,473 | |
INR 560,000 |
The estimated average starting salary of a Supply Chain Specialist in India is INR 484,333
The estimated average base salary of a Supply Chain Specialist in the United States is USD 61,243
The average pay of a Supply Chain Specialist in the United States depends on factors like experience, skill set, city and the employer.
City-wise salary
USD 52,176 | |
USD 69,710 | |
USD 67,613 | |
USD 61,581 | |
USD 77,097 | |
USD 72,445 | |
USD 55,000 |
Experience-wise salary
USD 55,096 | |
USD 59,087 | |
USD 65,927 | |
USD 66,462 | |
USD 70,644 |
Skill-wise salary
USD 62,094 | |
USD 59,998 | |
USD 60,778 | |
USD 61,081 | |
USD 16.30 per hour |
The starting salary (entry-level) of a Supply Chain Specialist in the United States is USD 55,096.
1000+
Top Companies
50%
Average Salary Hike
Top 1%
Global Universities
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A supply chain refers to the network of organisations, individuals, technology and processes involved in creating a product or service and its final delivery to the end consumer.
Supply chain management involves the planning and managing activities involved in the flow of goods and services from the raw material stage to the finished products.
In commerce, logistics refers to the planning and execution of efficient storage and transport of goods from their source to the final destination.
The five supply chain management processes or components are - plan, source, make/execute, deliver and return.
The six types of supply chain models are - the fast model, the continuous model, the agile model, the efficient model, the flexible model and the custom-configured model.
Supply chain management is important to businesses for several reasons, including increased visibility into supply chains, reduced costs, better customer service and improved finances.
Some of the biggest challenges companies face in SCM include quality customer service, cost of raw materials, labour and energy, supplier relationship, risk management, unforeseen delays, incompetent personnel and volatile markets.
The top skills to get hired for SCM jobs are knowledge of IT and automation, project management, awareness of market trends and consumer behaviour, negotiation abilities and communication skills.
There is no defined career path in SCM since your employment opportunities will depend on various factors like experience, skills, industries, organisations and the type of employers.
Some common job roles for SCM graduates include Commodity Specialist, Business Analyst, Distribution Manager, Operations Manager, Project Manager, Plant Manager, Purchasing Manager and Sourcing Specialist, to name a few.
Yes, an internship is extremely valuable if you’re aspiring to build a career in supply chain management. Internships give you hands-on experience and industry exposure in SCM, logistics, transportation and other relevant skills.
Yes, supply chain management is a good career choice in India. The demand for supply chain management professionals is high as organisations across various sectors realise the pressing need to strengthen the supply chain infrastructure for improved efficiency.
The responsibilities of supply chain management professionals depend on the specific job role. For example, production/operations professionals carry out product/service design, facility layout, location planning, capacity planning, demand forecasting and so on. On the contrary, procurement/purchasing professionals identify and analyse sources of materials, select and evaluate suppliers, negotiate contracts, place orders and acquire materials.
Purchasing/procurement, production/operations and transportation/logistics are the core areas in SCM.
While the average starting salary of an SCM professional in India is INR 484,333, entry-level positions in the United States pay around USD 55,096 on average.