Supply Chain Management: Types Benefits and How It Works?

What is Supply Chain Management (SCM)?

Supply chain management covers all necessary steps that convert raw materials into finished commodities. SCM manages the movement of goods and services. It entails streamlining a company's supply-side operations actively in order to increase customer value and obtain a competitive edge in the market.

How SCM Works?

Through supply chain management, suppliers try to create and run supply chains that are as efficient and cost-effective as is practical. Supply chains cover all aspects of production, product development, and the information systems required to coordinate these processes.

By streamlining the supply chain, businesses can reduce wasteful spending and speed up the delivery of items to customers. 

5 Stages of Supply Chain Management

1. Planning: To get the best results, SCM frequently begins with planning to match supply with customer and manufacturing demands. This has to do with the raw materials required at each stage of manufacturing, the capability and constraints of the equipment, and the personnel requirements throughout the SCM process.
2. Sourcing: Effective SCM procedures heavily rely on good supplier relations. Working with vendors to procure the raw materials required for the manufacturing process is referred to as sourcing.
3. Manufacturing: The manufacturing process can be further divided into sub-processes like assembling, testing, inspection, or packaging. A company must be aware of waste and other manageable issues during the manufacturing process that could lead to changes from the original intentions. 
4. Delivering: After production and closing sales, a company must deliver its products to clients. As the customer has not yet interacted with the goods, the distribution process is frequently viewed as a contributor to the brand's image. 
5. Returning: Even worse is when a customer has returned a product because of a mistake on the part of the business. The business must ensure that it has the tools necessary to receive returned goods and accurately assign refunds when they are received. 

SCM vs. Supply Chains

A supply chain is the network of people, companies, resources, activities, and technical breakthroughs used to produce and market a good or service. A supply chain starts when raw materials are sent from a supplier to a manufacturer, and the finished product or service is delivered to the customer.

SCM manages every stage of a company's product or service, from the beginning of development to the last sale. With so many points throughout the supply chain where efficiency can add value or lose value due to higher costs, effective SCM can boost revenues, cut costs, and have an impact on a company's bottom line.

Benefits of Supply Chain Management

Supply chain management has many benefits: increasing revenue, improving brand perception, and providing businesses a greater competitive edge. They consist of the following:

• Better supply chain visibility
• Risk management and predictive capabilities
• Less product loss and less inefficient processes
• Improvements in quality
• Increased sustainability, from a societal and environmental standpoint
• Lower overhead
• Better cash flow and more effective logistics are all benefits.

Types of Supply Chain Models

SCM does not appear the same in every organization. The SCM method used by each company is distinct because of its particular goals, constraints, and benefits. Businesses can often use six key models to guide their supply chain management processes.

The continuous flow model, one of the more established supply chain strategies, works best for developed sectors. The continuous flow model counts on a producer to continually produce the same good and a reasonably stable level of consumer demand. 

1. Agile Strategy: This model works best for businesses that provide products that customers order or have unexpected demand. This approach places emphasis on adaptability because a business might have a particular requirement at any specific time and it must be ready to change course accordingly.
2. Fast Model: This model places an emphasis on a product's rapid turnover due to its brief life cycle.
3. Flexible Approach: Businesses that are touched by seasonality do well using the flexible model.
4. Efficient Model: Businesses that compete in sectors with extremely slim profit margins may try to gain an edge by optimizing their supply chain management procedures.
5. Custom Model: A corporation can always turn to a custom model if one of the aforementioned models doesn't work for its requirements.

Example of SCM

A corporation, its suppliers, and its consumers make up the simplest form of a supply chain. Some examples are producers of raw materials, manufacturers, distributors, retailers, and retail customers.

What is a Supply Chain Management Example?

Supply chain management is known as coordinating the many tasks required to create and deliver goods and services to clients. Design, farming, manufacturing, packaging, and transportation are a few examples of supply chain activities.

Why is Supply Chain Management Important?

Supply chain management is important since it can aid in achieving a number of corporate goals. Controlling production processes, for instance, can raise product quality, reduce the risk of recalls and legal action, and help build a strong consumer brand. Control over shipping processes can also facilitate customer service by preventing periods of inventory overproduction or expensive shortages.

How Are Ethics and Supply Chain Management Related?

A set of guidelines known as supply chain ethics was created as a result of the growing importance of ethics in supply chain management. Investors and customers care about how businesses operate, respect their employees, and preserve the environment. As a result, businesses implement initiatives to save waste, enhance working conditions, and limit their negative effects on the environment.

What Are the 5 Elements of Supply Chain Management?

The five main components of supply chain management are planning, locating raw supplies, manufacturing, delivery, and returns. The planning phase entails creating a supply chain strategy that is comprehensive, whereas the other four components mainly focus on the essential conditions that will put that strategy into action. To prevent costly bottlenecks and establish an effective supply chain, businesses must build expertise in all five areas.

What Element of the Marketing Mix Deals With Supply Chain Management?

The marketing mix component of place deals with supply chain management since it includes the procedures that move products and services from their unprocessed origins to their final, consumer-facing destination.

COVID-19 Impact on Supply Chain Management

Companies that prioritize low cost over flexibility in their process management will quickly realize their inability to respond to fluctuating demands. Some industries, such as paper companies in charge of supplying toilet paper, found themselves in a dire situation as demand skyrocketed—toilet paper shelves were often empty in many urban and suburban markets. Those who had worked exclusively with foreign suppliers were suddenly out of material to work with, as the companies in other countries had been shut down. 

Supply chains have seen an increased need for communication, more sophisticated ways to track important details, and intelligent visual progress technology. They see a need for local vendors at reasonable prices and supply chain development that focuses on assessing risk and waste as opposed to general output. 

The players inside the supply chain have always struggled with effective coordination. Now, they’re faced with the reality of innovating new ways to communicate progress to other stakeholders in the supply chain, even beyond their current challenges. What once felt small and manageable from a design perspective, now feels uncertain. The supply chain is vast, including players from every level of production:

• Product designers and engineers
• Suppliers and vendors
• Manufacturers
• Shipping and distribution centers
• Retailers

Above all, the consumer and their demand now need to be addressed using a ‘pandemic’ lens. 

Before COVID-19 hit the world, it was already a challenge for SCM and process management professionals to adjust to the world’s digital transformation. Many companies were still working towards automating systems and creating digital resources to streamline processes. Now, during the pandemic, it has become even more imperative for supply chain companies to find creative ways to lean out their processes. 

Leveraging Lean Six Sigma to Control Chaos

Amid the pandemic, Lean Six Sigma can provide a wealth of knowledge, tools, and strategies to streamline critical processes and address fluctuating supply and demand conundrums. 

Just-In-Time Manufacturing

As the COVID-19 pandemic continues to unfold, people are calling for increased stockpiles for various products. However, with increases in stock comes a higher cost, potential waste, and potential production issues, which leaves large quantities of damaged or defective products sitting in a warehouse. 

Just-in-time manufacturing seeks to minimize waste and stockpiles of excess products by only producing that which meets the current demand. The largest benefit to just-in-time manufacturing is how it enables companies to quickly recognize and correct any potential issues to minimize future risk to production.  

Address Waste With 5s

When it comes to process management, work environments that are clean, organized, and safe will be key to identifying and addressing excess waste issues. 5S (standing for sort, set in order, shine, standardize, and sustain) is an effective method to eliminate waste from a work environment. When tools, materials, and equipment are accessible and organized logically, the odds of human error dwindle. 

Visual Management

One of the most difficult aspects of navigating the ‘new normal’ of this pandemic world is the sudden push toward remote work. Without being able to interact with colleagues personally, it’s easy to fall behind on projects, especially when there is a communication lag. 

While visual management typically manifests itself in the form of community Kanban boards or floor markings, virtual options are also available. Visual management offers effective solutions to make progress visible for all aspects of supply chain management. Providing visibility across the company, especially to key stakeholders, is critical for identifying problems and promoting progress. 

Continuous Process Improvement 

As restrictions continue to ebb and flow, companies feel pressure to navigate the quickly changing circumstances. These are the companies that likely don’t have a continuous process improvement mindset. 

First, continuous improvement posits that everything is a learning experience. Just as much, if not more, can be learned from failures as successes. Secondly, it encourages process management professionals to focus on identifying the next best improvement. This takes the pressure off folks in supply chain management roles to come up with the ultimate solution to every problem and encourages them to focus on the one thing they can improve right now. Once an improvement has been successfully implemented, they simply repeat the process.  

Six Sigma Certification 

Of course, a Six Sigma certification is an excellent way to learn lean strategies quickly and effectively. The problem-solving techniques and quality control tactics learned in a Six Sigma Certification program can provide profound changes to an organization’s overall functioning, making them more productive and profitable. 

Why Adopt Six Sigma? 

Before the COVID-19 pandemic hit, Six Sigma professionals were making significant impacts in their respective industries. Process standardization is the future for supply chain management, making folks with Six Sigma certifications a decidedly sought-after group of professionals. In both our current and the post-pandemic world, a highly streamlined digital infrastructure will become essential, and professionals with Lean Six Sigma knowledge will lead the way. 

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