What Is Supply Chain Management?
In business, supply chain management, which include the transportation and storage of goods, and the movement and disposition of raw goods, work-in-finished goods, and end-of-life inventory, is the crucial interface between producers, distributors, shippers, suppliers, manufacturers, brokers, auditors, and customers. The supply chain refers to the entire process of getting a product from production to distribution. The key aspects of the supply chain are logistics, manufacturing, and sales. Logistics involves the transportation of raw materials and finished products to the final stage of disposal. Manufacturing involves the process of creating and producing finished goods.
The supply chain has become an important strategy for long-term sustainability of an organization. Its key drivers are the ability to meet overall customer requirements and the ability of an organization to maintain the cost advantage. For organizations that invest in supply management, they spend less on over-utilization, waste, bankruptcies, and the damages caused by environmental issues. It also helps them sustain competitive advantage through the expansion of market share, reduce over-supply, and improve flexibility and security.
There are three phases involved in supply chain management and these are marketing, purchasing, and supply chain. Marketing takes the lead in negotiating prices with suppliers. It also facilitates the selection of desired components, processes, and technology used in production. Purchasing is the act of buying the goods that have been produced. It involves the actual sale of the goods to the end users. Supply chain, on the other hand, involves the actual transportation, storage, production, distribution, sale, and payment of purchased items.
It is very important for companies to develop an effective supply management system for improved efficiency and productivity. In the current scenario, companies cannot afford to lose out on the opportunity of increasing profit since they still depend on external resources like raw materials. Therefore, it is important for them to enhance their over-all profit margin by developing a strong inventory control system and pursuing an efficient procurement policy. This way, companies can improve the productivity of their productions as well as their profitability. To supply professionals, implementing inventory control and procurement strategies can be complicated and difficult but if a proper inventory management policy is implemented, then it can greatly contribute towards the growth and development of a company.
To supply professionals, establishing a good inventory control and procurement strategy means having a better sourcing arrangement and better relationship with all the suppliers. To achieve this, a company needs to have a regular and smooth supply chain management system that enables it to identify the right suppliers, purchase the right supplies, and negotiate with suppliers to provide competitive prices. For organizations that are unable to develop their own supply chain system, they can opt to hire a third-party to provide them with a supply chain management solution. A good and reliable supply chain management service provider can automate the entire supply process and help companies manage their inventory as well as their overall supply and marketing activities.
To supply professionals, supply chain and risk management are an essential part of conducting businesses. If you are in the manufacturing industry, it is very important for you to understand the relationship between supply management and risk management. Supply chain and risk management involve identifying the sources of risk, negotiating with suppliers on a regular basis, and implementing solutions to reduce any risks that have been identified. By properly integrating supply management and risk management, companies can ensure that the resources they acquire are utilized to the fullest.