As the businesses expand their operations from one city to multiple cities, the role of supply chain management becomes extremely important for the proper functioning of the business. So what exactly is that? If you are looking for the answer to this question, then you have landed at the right place. Let us delve deep into this. Here you can properly understand the meaning of supply chain management.
What is Supply Chain Management?
It can be described as a set of activities required to manage supply chain activities. It is required to provide maximum customer satisfaction keeping in mind the sustainable needs of the organization. Activities in supply chain management involve product development, production, sourcing, and logistics. It also includes information systems to coordinate these activities.
The idea of Supply Chain Management is based on two core principles.
- There are multiple organizations involved in managing the supply of the product that finally reached the endpoint.
- Secondly, the idea of supply chain management was already prevalent. But only recently it has taken a shape properly. And many organizations started paying attention to what was happening within their “four walls.”
All the organizations that participate in the supply chain are connected. But with the help of physical flows and information flows. Let us now understand the role of physical flows and information flows.
Physical flows include everything related to the physical movements of goods and materials. They are the most obvious and important part of the whole process of supply chain management.
Information flows allow all the key players to coordinate and plan on a long-term basis. It also helps to control the daily flow of goods and materials up and down the supply chain.
How Does Supply Chain Management Work?
Supply chain management helps business owners to link the production, distribution, and shipment of the product. Using supply chain management companies can cut down their costs significantly and make the delivery and shipment process fast and convenient. This is made possible by implementing tight control of internal inventories, internal production, distribution, and sales.
It involves planning and strategist considering all these aspects.
- The source of raw materials
- Delivery and logistics
- The return system
All this helps to minimize shortages and keeping the costs as low as possible. Supply chain managers are also responsible for making recommendations to improve the quality, productivity, and efficiency of operations.
Types of Supply Chain Management
The concept of supply chain management has evolved and advanced tremendously ever since it was introduced. There are many types of supply chain methods as given below.
Transaction cost analysis
This method is based on the financial models. This works after supply chain managers do the transaction cost analysis (TCA). TCA gives an insight into whether goods bought at a low price were sold at high-price or not. To put it simply, it allows business owners to find better prices.
Supply chain management and logistics companies deal with multiple companies. That is why it is better to look beyond individual channels and coordinate and make every possible effort to reduce overall costs and save time.
Many times it is the third party that plays an extremely important role. Then you would have to work keeping in mind the third party perspective. It could be possible that a third-party logistics provider is working with some other companies as well. This is something that can be used to save everyone money. This can be achieved using the network perspective (NP). The network perspective model takes into account the existing network of different businesses and looks at the possibility of forming connections other than what already exists. With the help of the NP model, the supply chain becomes the value chain. A huge network of interrelationships provides value to all the members of the value chain. In simple terms, NP is all the businesses working together via the common supply chain.
Materials Logistic Management
The supply chain also includes e-commerce businesses selling products online, where third-party logistics providers take care of warehousing, fulfillment, and shipping. The supply chain not only includes shipping final goods but also involves the proper management of raw materials. This is when Material Logistics Management (MLM) comes in handy.
MLM involves the planning, sourcing, stocking, production, and distribution of physical materials. A third-party service provider should make sure that the business receives material on time so that you can create the final product.
Material Requirements Planning(MRP)
It is quite similar to the materials logistic management process. It helps to find the lowest possible material inventory without affecting the production.
This can be further categorized into independent demand and dependent demand.
- Independent demand – This one is for finished goods such as mobile gadgets.
- Dependent demand – This demand is for parts or components of the finished products. For example, phone chips, phone batteries, and phone screens.
Total Quality Management
This type of supply chain management is focused on streamlining the whole supply chain. This involves everything from training employees to ensuring customer satisfaction. This method is way more comprehensive than any other method as it can focus on any area that has the scope for improvement.
Customer Relationship Management
Third-party logistics service providers can compile and analyze data. This helps them to find the important customer trends from buying history of customers and other valuable data.
Logistic Group Of America a logistics firm which provides the best supply chain management services since 2006. Connect and get more information about more services provided by LGOA.