Supply chain management plays a key role in conducting and performing various functions and operations of the company ranging from production, manufacturing, logistics, and sourcing. Today, we’ll discuss supply chain fundamentals; its definition, the key elements involved, and various types of SCM strategies.
What are Supply Chain Fundamentals?
Supply chain fundamentals or supply chain management is the method of dealing with the movement of products and services from sourcing, converting raw materials and supplies into finished goods, and delivering them to the customers. Effective and efficient SCM activities and processes allow you to increase customer value, remove waste, and achieve a competitive edge.
Elements of Supply Chain Management
Some of the key elements of supply chain fundamentals are as follows;
The SCM process starts with planning to meet the supply needs of customers and finding ways to produce their demand. Businesses and companies employ various types of forecasting tools to predict the future needs and demands of customers. However, it comprises of analyzing the material needs that the company would require at every stage of production and manufacturing like employee need and capacity limitation.
Businesses and companies usually develop strong professional relationships with their suppliers. Sourcing focuses on collaborating with suppliers and vendors to provide the needed supplies throughout the production and manufacturing process. However, the sourcing requirements of different businesses and companies are different and they’re as follows;
- Proven record of vendors on timely delivery of quality products
- Flexibility of delivering material in case of emergency situation
- Prices paid to the vendors are relevant to the market expectations
- Raw materials and supplies should be relevant to the production and manufacturing requirements of the company
SCM plays a key role when businesses and companies are dealing temperature temperature-sensitive perishable products. Companies should be careful of the lead time and whether their supplier has the capacity to satisfy their needs and requirements.
Production & Manufacturing
Product and manufacturing are at the center and heart of the SCM processes and network. In order to convert raw materials and supplies into finished, companies employ labor, equipment, and machinery. The SCM process doesn’t end after the production and manufacturing of the finished goods.
However, the manufacturing process comprises various sub-processes like packaging, inspection, testing, and assembly lines. Companies should be careful of the waste and other relevant factors that would disrupt the company’s operations and deviate them from their original plan. For instance, if a company is utilizing more raw supplies than estimated due to limited employee training or other factors. In such a case, the company should review its SCM processes.
After the production of the finished goods, the selling point comes where the company should deliver the finished goods to the end consumers. An effective SCM system means that the company has an efficient logistical and delivery channel that would safely and timely deliver the finished goods to the end consumers.
It means that the company should have a well-diversified distribution channel that has the capacity to deal with temporary transportation issues. However, if one channel is not working, then the efficient system requires you to employ the other one.
The SCM process culminates when the company offers support to the customers who have returned the company’s products. It is bad when customers return the company’s products, and it is worse if it is due to the company’s fault. However, the term for the return process goes by the name reverse logistics. The company should immediately process the returned goods and offer a refund to the customers.
The returns offer valuable feedback to the company and let them recognize the poorly designed products and the company should make necessary changes. The SCM process would likely fail again in the future if it does not rectify the customer returns.
Types of SCM Strategies
Some of the main types of models and strategies in the supply chain fundamentals are as follows;
The flexible strategy is suitable for those companies that work in different seasons. It means that those businesses have higher demand requirements during the peak season and low requirements in the off-season.
The focus of the fast strategy is on those products that have a short lifecycle and demand quick turnover. The fast model helps companies to take advantage of the latest trends; quickly manufacture the product and then sell it before the finishing of the trend.
Agile strategy is for those products that have unpredictable demand. This approach shows that the particular product would have a demand at a specific moment in time, and the company should respond to it accordingly.
The continuous flow strategy is suitable for mature businesses and companies. It is for the companies that are producing customer products over and over again and expecting that the customer demand will change.
Conclusion: Supply Chain Fundamentals
After an in-depth study of supply chain fundamentals; we have realized that supply chain management plays a key role in the growth of businesses and companies. If you are learning about the fundamentals of SCM, then you should keep in mind the abovementioned types, elements, and definitions.
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