Supply chain management refers to making decisions about the design, planning, and operation of the supply chain. All these actions are decisive to make a company succeed or fail.
In other words, the administration of the supply chain refers to the management of this chain, being fundamental for the profitability of the company.
Efficient supply chain management requires making good decisions. Therefore, it is necessary to have a large amount of information. This, so that the company can first integrate and coordinate the components and raw materials in the best possible way to produce the goods and services it sells, which must be efficiently delivered to customers.
Without a doubt, a correct administration of the supply chain can become a differentiating element for a company. It can also be a determining factor in applying both your corporate and marketing strategies. In addition, it contributes to the supply chain operating better and helps to have a better level of profitability.
Supply chain management features
Supply chain management should not be confused with simple materials and manufacturing control.
The main characteristics of supply chain management are:
1. Consider the supply chain as a single unit
First, supply chain management views the chain as a single unit. For that reason, it does not divide and delegate responsibilities between the different functional areas of the supply chain such as purchasing, manufacturing, distribution and sales.
2. Requires making strategic decisions
Second, supply chain management requires making strategic decisions for the supply process. Adequate supply becomes the main objective of all the areas involved in the chain. At the same time, this objective is very important from the strategic point of view, since it has a great impact on the company’s general expenses and its market share.
3. Different perspective on inventories
Third, supply chain management takes a different approach to inventories. Because, it turns to inventory as a last resort to achieve chain balance. But, it does not go to the inventories from the beginning.
4. Supply chain system approach
Finally, the focus of the supply chain system is full system integration. He is not only interested in the interrelation process between the areas involved in the system, but also that they are properly integrated.
Phases of supply chain management
The most important phases that supply chain management follows are the following:
In principle, you must design or consider the strategy to be used in the supply chain. The company must decide how its structure will be for the medium and long term. Likewise, how the chain will be configured, how the resources are going to be distributed and what processes must be carried out.
Naturally, design decisions should be consistent with the strategic objectives of the company. This will help increase the level of profitability. These decisions will need to be made for the long term. This is because modifications in the short term can be very expensive. Of course, these decisions must consider the conditions of uncertainty in which the market operates.
The most important decisions are:
- Perform the functions of the chain internally or outsource.
- Locate and determine the capacities of the facilities for storage and production.
- Transportation systems.
- Shipping and distribution routes.
- Information and technological systems.
Generally, the period taken into account for planning is from one quarter to one year. For decision-making, you first start with a forecast of the demand that you expect to have for the following year. Then, it is determined which markets will be served and from which points they will be supplied. Similarly, the production capacity and inventory policies that will be used.
Of course, it will always be necessary to consider the constraints you face. To carry out the planning process, it is always sought to optimize resources and performance to maximize profits. Also, the parameters within which the supply chain must operate during a specific period must be established.
The operation of the chain occurs in two phases:
- Development: Here the relationship with the suppliers of the raw materials that are necessary to produce the product is established. After choosing the providers, the shipping, delivery and payment methods are defined.
- Production : The product is made, tested, packed, and delivery planned.
Indeed, the goal of the supply chain is to satisfy market or customer orders in the best possible way. Weekly or daily periods are taken as reference. In this phase, the company distributes the inventory or production among the different orders. Therefore, dates must be established by which each order must be completed.
Additionally, warehouse assortment lists are created, assigning each order to a transport type and shipping method. Also preparing delivery schedules. As these decisions are shorter term, uncertainty is reduced and performance is optimized.
To conclude, it can be said that supply chain management is vital for the performance and generation of profits for the company. Supply chain management fundamentally involves making strategic decisions about the design, planning and operation of the chain.