What is Supply Chain Management

Students of business and management often ask about the supply chain to understand the logistics and operations behind the manufacture and distribution of a company's products. In the simplest terms, the management and regulation of the supply chain falls under this subject, so let us first understand what it really is.

An organization that manufactures or develops a product or a service has to transport this final product to the customer. The production process, the distribution process, and the management of the network of sellers and distributors falls under supply chain management. Its benefits involve getting better deals from the suppliers in the form of trade discounts, and also a general improvement in the relationship with the suppliers.

The simplest definition that can be found anywhere is, "The control of materials, information and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to customer." This entire network is known as the supply chain, and each party that receives the product and then carries it on, adds some value to the product and derives some kind of utility from it. The act of ensuring that all parties receive maximum utility and benefits in the movement of these various forces is what efficient supply chain management is about.

Elements of Supply Chain Management

There are primarily 3 elements that constitute supply chain management, and any individual or organization looking to follow the best practices should keep these elements in mind. Focusing on each of these elements, in order to combine them and deliver the best possible customer service, is the ultimate aim of this process.

Product
This channel of management implies that the product must be in demand. To create a product and not generate demand for it is a useless venture, as it is the demand for a product that ultimately, starts the entire manufacturing process. Ensuring that the product reaches the customer in a timely, accessible and quick manner is one of the key elements. Any delays, in this process, will lead to a loss of business.

Information
For a customer to demand a product, information about the product must reach to him first. Demand can only be generated in a customer if he is aware of the existence of the product in the first place. The information flow also involves the different channel partners communicating various needs and data amongst themselves, so as to enhance the ultimate goal of customer satisfaction.

Finance
The finances involved in the supply chain also play a major role. As the product passes from one subsequent stage to another, the mode and terms of payment must be clear. There are a lot of credit terms and conditions that can be applied in order to get the best possible deals from suppliers, and these can only be increased further by building up strong relationships with the suppliers.

Importance of Supply Chain Management

The importance of effective management lies in achieving more accurate information and the ability to carry out better sales forecasting. The following factors are some more reasons why this practice is so important and crucial for strategic planning and for the success of a business.

• It helps to build stronger partnerships and networks of suppliers.
• It helps to balance out the forces of demand and supply and then act accordingly.
• It helps to formulate better working strategies and business plans.
• It helps to forecast the transportation needs and requirements.
• It helps to plan the daily operations and logistics of the company.
• It aids in better and smoother inventory management.
• Lastly, it helps in shortening the supply chain by removing unnecessary elements. This makes the products reach the end customer faster.

Stages of Supply Chain Management

Now that we are a little more aware of what is the function of supply chain management, let us look at the 5 different stages involved in the process.

• Plan: The entire process must be planned out with the primary goal of the organization in mind.
• Develop: The potential suppliers are then contracted and conditions of delivery, payment and transportation are then finalized with them.
• Make: The product is finally manufactured, tested and packaged and then launched into the market.
• Deliver: This involves the transportation of the product through various channels into the hands of the ultimate customer.
• Return: Customer queries and complaints are handled subsequently. If there are any defective items present, they are returned to sender.

Every manufacturer needs to implement this effectively, in order to get his products to do well in the market. The company that has a faulty supply chain will eventually fall behind, in the race for market share. So its management is what covers a number of operations and processes, and its importance must not be undermined or overlooked in any manner.