What is Supply Chain Management?

October 18, 2021

Supply chains are nothing new. Society has used them for centuries to feed villages, cities, and eventually whole countries. However, supply chains became more business-oriented as commerce became a more refined part of society. If you own or run a business today, you are engaging with supply chains. Whether shipping your product to your customers or ordering production materials, your business relies on supply chains. This guide covers everything you need to know about supply chains and the best practices for managing them.

Overview of supply chain management (SCM)

The simple definition of SCM is the management of the flow of goods, data, and finances relative to a product or service. It involves every aspect of your business, from acquiring the necessary raw materials for production to the delivery of your final product. SCM is crucial to the function of any business. Often people associate supply chain management with logistics, but logistics are only one part of a larger system. SCM involves an abundance of functions like procurement, fulfilment, product lifecycle management, and inventory planning.

Most companies use SCM software to track and maintain their supply chains. These software systems can provide logistical information for every sub-function of your SCM. The information can provide details on your inventory, suppliers, fulfilment, transportation, and wholesalers. If your company interacts with supply chains frequently, investing in SCM software is a good idea.

History of supply chain management

As previously touched upon, supply chain management goes well back into our history. Supply chains existed in ancient times, as farmers found ways to transport their goods to feed growing villages and cities. It wasn’t until industrialisation that SCM became more of a science. As companies boomed and people became consumers, businessmen like Henry Ford found ways to streamline supply chains. With each technological advancement, the management of supply chains also became more advanced. Henry Ford’s interchangeable parts drove innovation for efficiency in supply chains, and the introduction of computers modernised the process.

In the 21st century, supply chain management has moved away from the standard linear function and now encompasses a complex collection of networks. With the introduction of a global economy in the modern age, companies had to find efficient ways to ship things across the world. We currently live in a time of unprecedented consumer demand, and the ability to shop and order products online, supply chain management has never been more important for businesses. Most of today’s supply chain management strategies use a combination of technology, people, and processes to deliver a system with the capabilities to deliver goods and services with impeccable accuracy.

One thing is clear when you consider the history of supply chains. They will continue to be a vital function of our society. Businesses cannot move forward if they do not consider how they interact or manage their supply chains. The companies that will thrive are those that build efficient and stable networks among the giant web of shifting and changing supply chains.

SCM’s focus today

Historically, supply chain management has focused on increasing speed and efficiency. While that goal has not necessarily evolved, the system has and will continue. The most significant way SCM has evolved is now the customer is the number one priority. With the rise of e-commerce and online shopping, companies are focused on ensuring the customer experience thrives.

Your supply chain management will focus on one thing: delivering a final product or service to your customers. Everything that happens before that will also be aimed at that goal. For example, you should consider this goal when you are managing your production supply lines. You want to streamline supply chains, so you can cut production times and deliver your product more quickly. In the world of e-commerce and online shopping, supply chain management is about protecting your customers’ experiences.

Supply chains today are also more complex. Customers can choose many ways to shop. They can go in-store, purchase goods online, and more. Supply chains became agile in response to the many ways a customer can shop. Yours need to be agile too. Agile supply chains deliver on your customers' expectations. You need to ensure all of your storefronts, physical or non-physical, are well stocked for all your customer shopping preferences.

World politics are another reason for the increased complexities in supply chain management. Now that companies are shipping and receiving globally, trade policy and international affairs become roadblocks for supply chains. Tariffs, embargos, and bans can all cause headaches for companies trying to acquire or send products. It is important modern-day SCM practices include the ability to pivot quickly to find an alternative source of a product.

Good SCM practices to increase e-commerce business

E-commerce is one of the reasons for the SCM evolving to become more customer-focused. E-commerce is when a store sells its products in an online store. The industry has grown rapidly around the globe since the introduction of the internet. More companies are opting for an online-only store because it cuts labour and property costs. However, a strong e-commerce business relies on supply chains. When your SCM practices are good, your e-commerce business will expand. Here are some basic practices you can implement to improve your supply chains and thus your e-commerce sales.

Start by prioritising delivery speed. Your customers are shopping online, so they know they won’t immediately have the product in hand. However, that does not mean they are patient.

You want to ensure your supply chain is streamlined so that your orders are processed, fulfilled, and delivered quickly. One way to streamline your supply chain, in this instance, is by splitting up your inventory in multiple warehouses located across the country. By doing this, you can ship products to customers from a distribution centre closer to the customer. Doing this will shorten delivery times and decrease your costs.

Another way to increase efficiency in your supply chain is automated barcodes. Laser-based technology can convert barcodes into readable data and information. Best of all, the computers in this system can read and automatically process information. So, you cut out unnecessary components in your process, saving you time and money. These are only a few of the practices you can implement that will streamline your supply chains. You can take many approaches to improve your shipping process. However, the couple practices mentioned here are a fantastic starting block for most companies

The future of SCM

When looking ahead, SCM will only become more responsive to the customer experience. More companies are going to look to their supply chains to ensure that customers are receiving their products with speed and accuracy. In theory, supply chain management could also become more complex. As each node in the giant web of shipping networks becomes more streamlined for the customer experience, international politics could throw up roadblocks for companies.

Additionally, the pandemic has had a significant impact on SCM. Ports in Europe were backlogged for months at the height of the pandemic. As more people were forced to shop online and shipping companies had to navigate working around the virus, supply chains took a serious hit. You cannot consider the future of supply lines without analyzing the effect COVID- 19 had on the overall process.

Finally, technological advancements are going to continue to evolve SCM. Robots, cloud services, and automated systems are going to drive efficiency into supply chains. Down the line, entire order fulfilment centres could be running by robots. Businesses need to evolve with supply chains if they want to continue to thrive. So, staying up to date on all the innovations in SCM needs to be a high priority.

Jobs in SCM

Jobs in supply chain management are only going to continue growing as e-commerce becomes more popular. There are many different jobs in the field, all with their respective responsibilities and duties. You could work as a supply chain manager, fulfilment associate, warehouse manager, or director of logistics. You would benefit from familiarity with SCM software if you are interested in any of these roles.

Why is SCM important?

Supply chain management is critical to your business because it will continue growing as a factor in your customers’ experiences. E-commerce is a booming industry, with most companies having an online store. Learning about efficient practices in SCM is only going to help your company evolve with the global economy. Should you choose to ignore supply chains and their management, you will only experience problems in your production and customer satisfaction. Those areas of your business cannot suffer, or eventually, you will close your doors.

There is no reason to fear investigating your supply chains. Doing so will only find ways to improve your business. Small to mid-size businesses sometimes lack the resources to manage supply chains. However, you can outsource it to a logistic company. While it may feel like an expensive partnership at first, when you are well supplied, and your sales increase due to speedy delivery, you’ll see it was all worth it.