What is Supply Chain Management?

A supply chain covers every step in the manufacturing process, from sourcing raw materials to delivering the finished product. Because each aspect of a supply chain depends on all the others, proper supply chain management (SCM) software is essential to keep everything running smoothly. 

As such, it’s crucial 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 CIO’s Role 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 steps of any supply chain can be broken down into five categories: 

  • Planning
  • Sourcing
  • Manufacturing
  • Delivering
  • Returning

Each of these categories includes numerous steps in order to transform a product design and a demand forecast into a real-life package sitting on a store shelf or 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 automobiles, consumer goods, electronics, appliances, clothing, and children’s toys. Basically, any manufacturing environment requires supply management for optimal efficiency.

When implemented correctly, supply chain management offers multiple benefits to companies. Accurate demand forecasting decreases the chances of both under- and over-supplying goods, helping to cut down on excess storage space and ensuring that consumer needs will be met. 

A properly managed supply 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 reduced redundancy mean decreased production costs, too.

All of these factors combine to result in 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 in the early stages of planning and follows products through their lifecycles.

First, it’s important to accurately forecast future demand using past data and prediction models. This helps estimate the need for raw materials, staffing capacity, and manufacturing equipment time.

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

Next, those raw materials need to be turned into the finished product via manufacturing, which usually involves assembly, testing, inspection, and packaging.

After this, the products may be shipped straight to the consumer or transported to an intermediate warehouse. Inventory may be stored here until it is ready to be shipped to retail stores or individual customers. 

Finally, companies must prepare for returns at their retail locations and/or warehouse. In these cases, manufacturers should continuously improve their return management by analyzing key data to identify trends in their returns such as incorrect deliveries or defective stock.

How CIOs and tech teams support supply chain management

Supply chain management is a complex field that requires sophisticated SCM software to manage 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 dramatic.

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

In terms of specific roles, CIOs set the company vision for software-driven supply chain management and communicate that vision to the rest of the company, in particular fellow C suite leaders. 

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

Tech teams also provide critical assistance to other departments at every step of the supply chain, from assisting with demand planning software to programming the shipping notification system.

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

Read next: Best Supply Chain Management Software

Kara Sherrer
Kara Sherrer
Kara Sherrer is a writer and marketer who has worked with both B2C and B2B clients across many different industries, including technology. She is passionate about helping clients to create and promote informative content according to SEO best practices. Discover more of her work at karasherrer.com.

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