What is Supply Chain Management? Definition and examples

A supply chain covers all stages of the manufacturing process, from sourcing raw materials to delivering the finished product. Since every aspect of a supply chain depends on every other, good supply chain management (SCM) software is essential to keep everything running smoothly.

As such, it is essential that CIOs understand what supply chain management is, how it works, and how they can improve supply chain processes for their organizations.

Read more: The role of the CIO in maintaining a strong supply chain: an interview with Joe Velez at Ultra Consultants

What is supply chain management and why is it important?

The main stages of any supply chain can be divided into five categories:

  • Planning
  • Supply
  • Manufacturing
  • Delivery
  • Back

Each of these categories includes many steps in order to turn a product design and demand forecast into actual packaging that sits on a store shelf or on a customer’s doorstep.

Supply chain management involves coordinating all these activities and overseeing every aspect of the supply chain to optimize it. Supply chain management is needed in many industries, including automotive, consumer goods, electronics, appliances, apparel, and children’s toys. Basically, any manufacturing environment requires supply management for optimal efficiency.

When properly implemented, supply chain management offers multiple benefits to businesses. Accurate demand forecasting reduces the risk of undersupply and oversupply, helping to reduce excess storage space and ensuring consumer needs are met.

Properly managed procurement has fewer delays and bottlenecks, resulting in a faster production pipeline that allows a company to manufacture more goods in the same amount of time. Less downtime and less redundancy also means lower production costs.

All of these factors combine to lead to increased profits and customer satisfaction, making supply chain management a smart business decision for any manufacturer.

How does supply chain management work?

Supply chain management begins at the earliest stages of planning and tracks products throughout their life cycle.

First, it is important to accurately forecast future demand using past data and prediction models. This allows estimation of raw material requirement, staff capacity and manufacturing equipment time.

Once a forecast has been established, it is easier to source raw materials from reliable and competitively priced suppliers who can deliver the materials on time. This step involves comparing multiple vendors and performing cost analyzes to determine the best option.

Then, these raw materials must be turned into a finished product through manufacturing, which typically involves assembly, testing, inspection, and packaging.

After that, the products can be shipped directly to the consumer or transported to an intermediate warehouse. Inventory can be stored here until ready to ship to retail stores or individual customers.

Finally, companies must prepare returns at their points of sale and/or warehouses. In these cases, manufacturers need to analyze key data to identify trends in their returns, such as incorrect deliveries or defective inventory.

Learn more about TechnologyAdvice: The future of e-commerce shipping and supply chain

How CIOs and Tech Teams Support Supply Chain Management

Supply chain management is a complex area that requires sophisticated SCM software to be managed properly. Indeed, the global manufacturing landscape has become so complicated that even very small businesses often need SCM software to manage their supply chains. For large multinational organizations, this need is even more pressing.

Without an IT department to help deploy and maintain SCM software, companies will struggle to manage their day-to-day supply chain activities and strive to optimize. Thus, having a skilled IT team that understands the intricacies of SCM and related software is crucial to maximizing the potential of supply chain management.

In terms of specific roles, CIOs set the company’s vision for software-driven supply chain management and communicate that vision to the rest of the company, especially other C-suite leaders.

Meanwhile, the IT department keeps the SCM software running smoothly on a daily basis. They are responsible for maintaining cybersecurity measures for the supply chain, ensuring that proprietary information remains protected.

Technical teams also provide essential assistance to other departments at every stage of the supply chain, from assistance with demand planning software to programming the shipment notification system.

In today’s world, it’s impossible to separate supply chain management from technology, which is why CIOs need to stay on top of business intelligence, automation, robotics and many other technology trends that are already changing the face of supply chain management.

Read next: Best Supply Chain Management Software

About Shirley L. Kreger

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