What is supply chain management?
As its name implies, in its simplest terms, it means efficiently managing a company’s supply chain, which traditionally consists of three components: customers, a producer, and the producer’s suppliers.
However, many people forget about extended supply chains, which often include a number of additional entities, including the customers’ customers, as well as the suppliers’ suppliers. These subsidiary relationships are just as important as primary ones because they affect the supply and distribution of products.
For example, if you own a shoe company and your customers (shoe stores) lose customers due to street construction or store closure, this affects the number of orders they will place with your company for new merchandise. Reversely, if one your suppliers’ suppliers suffers from a plant closure or logistical issue that affects your business’ ability to manufacture product.
While most supply chain managers only control the immediate chain, they are ultimately responsible for the integrity and efficiency of the entire supply chain.
The art of supply chain management entails three key steps: purchasing, production and fulfilment. Supply chain managers oversee and work to optimize the processes of acquiring inputs from suppliers (purchasing), converting those inputs into a finished product (production), and delivering those products to customers (fulfillment).
In order to manage the extended chain, supply chain managers must ensure the locations where manufacturing and distribution facilities are located are accessible and in politically stable jurisdictions. They must also decide how to organize which goods and materials go to which facilities and from which parts of the world to source the inputs.
Supply chain management is fundamental to a company’s viability. From my experience, I have seen first-hand clients heavily investing in integrating the latest technology into their supply chain in order to promote efficiency and sustainability.
As the world becomes more globalized, the role of the supply chain management has become even more important, especially for companies that source goods and raw materials from around the world. To help ease some of the confusion caused by the vastness of an multinational supply chain, many managers are utilizing a robust array of software to help track, log and monitor each link in the supply chain.
In fact, according to the Wall Street Journal, “The market for supply-chain management software grew 11% to $11.1 billion in 2015, on a constant-currency basis, and is estimated to grow to $17.6 billion by 2020.”
Growth in the cloud computing sector has also ushered in a new age of supply chain management that offers better control of logistics and transportation. Monitors on trucks connected to the Internet of Things can notify managers of shipment distributions and transport issues in real time giving managers time to look for alternate solutions.
As the old adage says, you are only as strong as your weakest link — it is the supply chain manager’s job to make sure no links are weak or compromised.