Today’s consumers are a pampered lot. With brands falling over each other to woo them and achieve their targeted business goals, the baseline expectations of modern consumers have reached greater heights. A high standard of demand puts businesses under extreme pressure to deliver. This has led to the evolution of the entire supply chain from a functional task to a complex process involving a globally interconnected network of data. As a result, the components of the supply chain management have evolved as well.
Businesses are transforming their supply chain management processes in several ways to meet modern customer demands. They integrate cutting-edge technologies such as Artificial Intelligence, Machine Learning, and Blockchain to ensure faster and more efficient delivery of manufactured goods along the value chain.
Modern supply chain management involves innovative and proactive approaches and is focused on constantly improving supply chain practices. The whole process must be viewed holistically for businesses to achieve the highest efficiency in their supply chain management efforts.
There are five critical components of modern supply chain management. They are:
Planning: The Invariable Component of Supply Chain Management
The first and the most essential step in any supply chain management process is planning. It helps you get a preview of the various resources needed to meet customers’ demands and serve them effectively.
Analyzing the demand for products, checking the feasibility of the order, the costing factor, and estimating the profit are all part of the planning process. Planning also helps you decide the hours of human resources and other vital resources that must be deployed to carry out the task efficiently and successfully.
Without a proper strategy in place, your supply chain may run into unforeseen hurdles that can completely derail the process. Enough time must be devoted to planning to ensure everything falls into place. Once the plans are finalized, you will have a clear picture of the roadmap for the supply process. It helps you identify the potential problems you may confront at various stages and remain prepared to deal with them proactively.
Planning helps identify the critical metrics you must use to ensure the efficiency and effectiveness of your supply chain. You can remain focused on your organizational goal and stay on course to meet them.
Sourcing: An Important Building Block of Supply Chain
Sourcing is the second most important component in the supply chain management process. Your organization’s performance depends largely on how efficient and competent your supply resources are. It is imperative to choose reliable and experienced suppliers to ensure a smooth and hassle-free movement of goods from your end to the consumer.
Apart from providing you with the products on time, your suppliers must also be focused on delivering quality products at competitive prices. Finding the right resources for products is not an easy task. With competition in the market becoming increasingly cutthroat, everyone is trying to tie up with the best supply sources to bolster their business prospects.
Strategic sourcing is all about achieving the lowest TCO or Total Cost of Ownership while minimizing supply chain risk. Your relationship with your sourcing partners must not be seen as a one-way process. It must be a loop in which you keep revisiting the suppliers and their core capabilities. You must keep developing and aligning your sourcing strategies to the organization’s requirements.
In strategic sourcing, suppliers play the crucial role of a valued partner. The customer-supplier loop must be assessed at every stage of its lifecycle to ensure that the organization’s goals are continuously and efficiently achieved. Strategic sourcing involves leveraging your spend analysis, supplier evaluation, supplier relationship management. It also involves detailed market research.
Sourcing is a long-term process that must be implemented successfully using your best professionals and relevant tools and technologies.
Inventory: An Indispensable Component of Supply Chain Management
The hallmark of an effective and efficient modern supply chain management is a well-maintained inventory. Your inventory list may include all the essentials for efficient management of the supply chain process. It must be borne in mind that this is not a one-off list but must be regularly revisited and updated to match the changing demands of the system and consumers.
Inventory management is very crucial for the smooth functioning of supply chain management. Without proper inventory management, you may face numerous hurdles in the production and sale of the product, which can spell trouble for your business.
With the availability of modern inventory management tools and technologies, your business can have a better grip on inventory with less input and effort than before.
Logistics: The Backbone of Supply Chain Management
What was previously referred to as the delivery component of supply chain management is nothing but modern-day logistics. How you deliver is a vital aspect of the supply chain management process. Your customers are easily influenced by the quality and pricing of your product. The speed and efficiency of delivery also matter a lot to them.
The logistics component involves critical elements like coordinating the orders, scheduling delivery dates and processes, dispatching, invoicing, deciding on the method of payment, and receiving payment. Logistics also involves choosing the best possible and most efficient route of delivery.
It has become a norm for many organizations to outsource their logistics to companies specialized in the task in the modern business world. It helps reduce their work and works best when the delivery process requires special handling and out-of-the-box efforts to meet delivery schedules and deadlines.
Returning: A Supply Chain Component That Makes The Entire Supply Chain Wholesome
This component involves handling the goods returned by consumers and clients for various reasons. It could be for excess quantity, defective goods, or unwanted orders. In the modern business world, this component is termed reverse logistics. Handing returns is an essential element of the supply chain management process. It must be designed to minimize the potential damage of relationships with customers and suppliers.
Supply chain management has emerged as the battleground for customer loyalty, forcing companies to respond appropriately to the fast-changing consumer demands and challenging business conditions. By using new technologies, companies can gain more precise control of the supply chain management process at every step of the journey. It is evident that companies adopting modern systems and processes are reaping the benefits through higher productivity, improved revenues, and greater profits.