Supply chain management isn’t a new field by any stretch of the word. However, as fundamental as it is to business management, it’s still a field that has a lot of misconceptions, or that people don’t understand to the full extent.
If you’re happily sporting your MBA at interviews, this article probably isn’t for you. However, if you’re involved in business management in any capacity, and you want to understand more about supply chain management, this piece will help you understand the basics of it.
What is Supply Chain Management?
Supply chain management is “the management of the flow of goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business’s supply-side activities to maximize customer value and gain a competitive advantage in the marketplace”.
Let’s explain this in more clear terms.
Imagine you walk down the aisle of a supermarket and you see a bottle of water. In appearance, a simple object. However, imagine that the contents of the bottle, the bottle itself, and the packaging all have had a very long road before they made it on that shelf in front of you.
The water needs to be sourced from somewhere, collected, driven to a lab, processed, driven again to a manufacturing plant, processed, and then driven one more to the store you’re buying from. And that’s just the water itself, and only in the happy case when there are no hubs along the way.
In short, it needs supplies to make it to your shelf. And those supplies are exactly what supply chain management deals with. The job of a supply chain manager is to oversee all the logistics of sourcing and processing materials for the products you buy.
But it’s not just products. Services follow a similar pattern too. You might not imagine a hotel to be reliant on supply chain management, but it is. When you boil it down to principle, hotels are units of manufacturing services, just like electronics factories are. They rely on supplies like towels, cleaning supplies, or prime materials for cooking to be delivered regularly, and their service is reliant on people performing specific tasks at specific times.
In short, all businesses have a supply chain. In a corporate context, any hitch in the supply chain can be disastrous, so flawless, cost efficient, and qualitative supply chain management is crucial. For smaller businesses, you don’t require a team to oversee the entire process, and you certainly can’t have much of an impact on the ethicacy of it. But you can apply supply chain management principles to your own business, to improve it.
Acquisition is one of the biggest parts of supply chain management, but probably not in the way you expect. Improving your acquisition process isn’t always about cutting costs. In fact, the first order of business for people working in acquisition departments is to determine other factors, such as:
- Supply quality
- Supply fit to business needs
- Supply functionalities and advantages
And only after it’s determined that a range of products fit the needs of a business, only then do they worry about costs. It only makes sense. Higher price doesn’t always equal higher quality, but more qualitative supplies do tend to cost a bit more. You can apply the same principle when sourcing supplies for your business. Aim to find solutions that fit your needs, and can help you take your business further, and only then worry about costs.
Production And Delivery
Much like acquisitions, production and delivery aren’t focused on exploiting workers to maximize production without a worry for the long term of your company. Rather, supply chain managers try to figure out production and delivery solutions that are efficient for all parties involved, and in turn provide sustainable growth.
A good way to find production and delivery solutions that ensure evolution is to default to big data. Let the system you have run for a while, and study every nook and cranny of it. Check production and delivery times, the schedule of your workers, when everyone is most productive, how much money it takes to create one product, how many supplies… round all of this (and more) in a spreadsheet.
With this data, make changes to your production and delivery processes to ensure more efficient business processes.
Planning Is Key
Like any logistical undertaking, good supply chain management relies on proper planning. Think about it like this: if someone asks you how you made it from Frankfurt to London, you’ll probably say you took the plane.
While that’s true, it only tells part of the story. If you’re to break it down in the smaller details, you actually took a car ride from your apartment in Frankfurt to the airport, went through airport security, probably hung around the waiting terminal before your flight, boarded the plane, then took another car ride to the place in London where you’re at now.
The details are always more complex.
And in supply chain management, those small details can make the difference between efficiency, and extra costs. If you want to acquire supplies, manufacture them into great products, and deliver them on time, you need to plan everything in that process. Map out every single stop along the way, and you’ll have a better overview of your business processes.
Supply chain management is a fascinating field, because it equips business owners to improve processes they probably don’t think about too much. From better acquisitions, to properly planning your supply chain, we hope that our article showed you new ways to analyze your business, and improve its day to day activities.