Article

What is SCM (Supply Chain Management)?

What Is Scm (Supply Chain Management)?

What is a supply chain?

Supply chain management is the ecosystem of connections between a company and its suppliers. This network includes different stakeholders, activities, people, entities, information, and resources.

Simply put, a supply chain network connects all elements and covers all the steps involved in getting products or services from their initial state to the customer, including functions such as development, manufacturing, marketing, operations, distribution, financial management, and customer service.

What is SCM (Supply Chain Management )?

Supply Chain Management is about managing and uncovering ways to improve supply chain operations. It refers to the oversight and control of all company activities required to turn components and materials into finished goods, and distribution, delivery, and service processes required to deliver products or services to partners, customers, and end-users.  


SCM provides centralized control for the planning, design, manufacturing, inventory, and distribution phases necessary to produce, distribute and sell a company’s products.

SCM consists of five main components:

Icon2

Planning

Icon4

Sourcing

Icon5

Manufacturing

Icon6

Delivery

Icon1

Returns

By orchestrating the synchronization between these core processes, SCM improves efficiency, reduces costs, increases productivity, and helps to adopt flexible approaches to respond to disruptions quickly.

Supply Chain Management best practices help to coordinate supply and demand across the various stakeholders in the supply chain and enhance the product quality to deliver a competitive advantage, leading to increased sales and revenue. 

Why is Supply Chain Management important?

Supply Chain Management performance has a direct effect on the  overall performance of any and every organization. Today’s business environment, characterized by unpredictability of supply and increasingly complex supply chains driven by global sourcing, multi-channel distribution, and widespread markets, rendered agile, resilient Supply Chain Management methods essential.

Poor Supply Chain Management puts the company at risk of costly delays, quality issues, and loss of reputation. Poor supply chain management can also cause compliance issues and legal consequences.

What is the extended supply chain?

“Extended” refers to supply chain processes extending beyond company boundaries of customers, suppliers, and business partners to include more distant links to the individuals, organizations, and resources a company works with directly. For example, Tier 2 and 3 suppliers and the customers’ customers. 

Information sharing among all stakeholders in the extended supply network offers significant advantages. A business with visibility into its extended supply chain can often predict future disruptions. Extended supply chain broadens the management scope beyond the business processes covering the supply chain, treating the entire network as part of it. Suppliers will have complete visibility into customer demand and ready their response plan, providing full inventory visibility and tending scheduling needs.

What is a digitized supply chain?

Supply chain digitization is a part of modernizing supply chain operations into digital processes by establishing an integrated, cross-functional pool of data gathered from internal and external sources across the supply chain, using automation and business intelligence. (e.g., sales data, POS data, competitor prices. etc.)

How does Supply Chain Management work?

Simply put, the overall workflow of Supply Chain Management is split into three different categories: product, information, and finances. Every organization part of a supply chain works under one of these domains.

Product flow – includes the timely formation, storage, and delivery of goods in the supply chain, including quality assurance tests at every step of the product lifecycle.

The information flow handles the continuous process of sending and receiving purchase orders and updating delivery statuses. All other workflows depend on the accuracy of the information flow throughout the supply chain. The financial flow deals with payments, inventory management, billing, credit terms, and other workflows related to finance.

 

Schedule today!

Schedule a no-obligation call with one of our experts to get expert advice on how Priority can help streamline your operations.

Artboard 6 100

Benefits of ERP Supply Chain Management

Strengthen Vendor Relationships
Improved Data Visibility
Demand & Procurement Management
Reliable Processing & Documentation
Enhanced Interoperability

Strengthen Vendor Relationships

Enables better communication between vendors and the business, as both parties can easily access information about orders, deliveries, and payments. This leads to greater trust and collaboration, ultimately resulting in stronger, more successful partnerships.

Improved Data Visibility

ERP software provides a real-time view of all operations, targeting specific inefficiencies for better outcomes and obtaining vital performance indicators ranging from orders and fill rates to freight bill accuracy and customer order cycle times.

Demand & Procurement Management

ERP helps create automated demand planning processes upon orders received. From Warehouse Resource Management to transportation of materials, team members can access real-time information about resources used in production and plan accordingly. Implementing procurement in supply chain management helps to reduce business expenses and increase overall profitability.

Demand &Amp; Procurement Management

Reliable Processing & Documentation

An ERP system automatically generates invoices sent directly to the customer as products are shipped and collects shipment and delivery data to ensure on-time delivery and customer satisfaction.

Enhanced Interoperability

ERP Supply Chain Management processes help streamline coordination between businesses and vendors to meet mutual goals and reduce bottlenecks.

Key Scm Processes

Key SCM processes

  • Procurement: Procurement is a subset of the entire supply chain management. Based on the demand plan, purchase orders are sent to suppliers to ensure they can meet quantity and delivery requirements.

  • Manufacturing: Manufacturing to plan production runs and ensure capacity to meet demand.

  • Inventory Management: Optimize stock levels, increase inventory turns and reduce holding costs by tracking the status of all items throughout the cycle.

  • Order Management: Sorting, prioritizing, and tracking orders fulfillment and shipping.

  • Customer Service: Maintain consistent communication with vendors and customers.

SCM technologies

Rapid globalization, increased product complexity, and growing customer demands bring companies to adopt new technologies to transform their supply chain. Advanced tools and sensors allow companies to collect data throughout the product’s lifecycle at every checkpoint. Machine Learning (ML), Artificial Intelligence (AI), and advanced analytics help drive automation and deliver insights that promote efficiency and drive innovation.

Layer 1 2

Demand forecasting

Advanced, automated demand forecasting allow companies to forecast demand more accurately, automatically optimize inventory levels efficiently, and replenish inventory accordingly.

Layer 1 1

Automated shipping

Automated shipping solutions eliminate some of the manual tasks in order fulfillment, automatically putting orders in queue. Shipping technology can be intricate like AI or as simple as installing infrastructure components

Layer 1

Robotics

Widely used in the supply chain to move materials or build products faster and with enhanced efficiency, advanced robots deployed in Supply Chain Management systems often enhance and streamline operations, such as detecting product defects and processing errors.

SCM trends

According to Gartner’s Prediction of the Supply Chain Technology future, By 2024, 50% of supply chain organizations will invest in applications that support AI and advanced analytical capabilities.

Icon4

AI and advanced analytics:

According to Gartner's Prediction of the Supply Chain Technology future, by 2024, 50% of supply chain organizations will invest in applications that support AI and advanced analytical capabilities. Leading organizations increasingly adopt artificial intelligence technologies in their supply chain and advanced analytics to go through vast amounts of generated data.

Icon5

Supply-chain-driven commercial growth

The supply chain will transform into a customer-centric function with a capacity to sense customer needs and wants and deliver a timely response.

Icon3

Environmental and social commitments

Customer expectations around social and ecological sustainability will apply to the entire product life cycle. Buyers will speak with their wallets by purchasing only from companies and suppliers that demonstrate authentic achievement of commitments.

Icon1

Real-time execution of supply chain processes

Organizations will grow their data capabilities to convert real-time data into real-time analytics and from real-time analytics to real-time decision making, enabling automated execution of key processes such as planning and inventory optimization.

Icon2

Flexible work experiences

Supply chain organizations rapidly evolve towards full adoption of automation technologies like robotics and AI that support human-to-human and human-to-machine interaction, allowing managers to measure performance based on performance.

The future of Supply Chain Management

Supply Chain Management Technology aims to improve product quality faster and help organizations improve and better serve their customers’ dynamic needs and requirements.

As industry 4.0 gains momentum, industry leaders must adapt to, analyze, and predict consumer demand on the go.

See how Priority works for you