Supply Chain Management

Supply chain logistics illustrated by global transport.Supply chain management is the organization of activities which bring goods and services to people. After waking up this morning, you ate breakfast… milk, bread, fresh fruits, eggs and the like. Don’t undervalue the fact that you can enjoy these products.

The process of making that bread and eventually delivering it to your table is not short of miracle. There are numerous activities, functions, people and transactions involved in manufacturing and delivering it. All these activities, functions, people and transactions are connected together as a chain (the supply chain); through which physical products like bread and virtual elements such as information flow constantly back and forth.

To create maximum value for that bread, all participants within the supply chain have to carry out their functions and coordinate well with each other. The process of coordinating different elements is known as supply chain management (SCM). It complements the operation of markets, by which suppliers and buyers coordinate activities through price signals.

What is Supply Chain Management?

Supply chain management is the oversight of products, information and finances as they flow in a process from suppliers to manufacturers to wholesalers to retailers to consumers. This involves managing the movement and storage of raw material, work-in-process inventory as well as finished products from the point of origin to the point of consumption. SCM drives coordination of activities and processes within and across finance, marketing, sales, product design and information technology facets.

Typically, SCM attempts to centrally link or control the production, transportation and distribution of products.

Supply chain management is a cumulative effort

SCM is an integrating function whose primary responsibility is linking major business processes and functions within and across organizations into a cohesive and high performing business model. It represents a conscious and cumulative effort by different organizations to run the supply chain efficiently and effectively so as to achieve competitive advantage and maximize customer value.

SCM Components

SCM is made of five basic components:

  • Planning—the organization must have a strategy for managing the resources required to meet customer demand for their products.
  • Sourcing—next, the organization has to choose suppliers of the raw materials needed to create their products. This also involves setting delivery, pricing and payment processes with suppliers and creating metrics to be used to monitor and improve the relationships.
  • Making—this is the manufacturing stage. It involves scheduling the activities required for production, packaging, testing and preparation for delivery. Here, companies must be able to measure quality levels, worker productivity and production output.
  • Delivering—in this stage, organizations coordinate the receipt of customer orders, develop a warehouse network, pick carriers to transport products to the customer and set up invoicing systems to receive payments.
  • Returning—Lastly, Supply chain managers must create a flexible and responsive network for receiving excessive and defective products back from the customer as well as supporting customer complains.

Essentials of effective SCM

Customer focus

The fundamental focus of supply chain management is understanding customers as well as their values and requirements. Organizations must seek to understand exactly what customers expect from their product and then focus their efforts to meet these expectations.

Information flow

Companies have to make investments in technology that will enable them to access lots of timely information. Proper information flow is vital to the visibility of products as they move through the supply chain. It can be achieved by developing partnering relationships with all members of the supply chain.

Measurement

Finally, organizations must adequately consider various techniques to measure how successful they have been at delivering value to the customer.

Value of Good SCM

  • Boosts customer service. Supply chain management affects customer service by ensuring the right product quantity and assortment is delivered in timely fashion. Through effective SCM, products will be availed to the exact customer location. The customers will also get quality after-sale support.
  • Improves bottom line. SCM lowers the usage of various large fixed assets such as transportation vehicles, plants and warehouses in the chain of supply. Also, it increases cash flow because once product delivery can be expedited, then profits will be received quickly.
  • Reduces inventory costs.
  • Provides a medium for sharing of information between supply chain partners.
  • Maintains greater trust between supply chain partners.
  • Provides efficient manufacturing strategies.
  • Improves process integration.
  • Allows for ethical and sustainable investment (Investing Responsibly Resources Center).
  • Exchange of real-time data increases the speed of transactions.
  • Increases business revenue by satisfying the demands of customer more efficiently.

Bigger than Business

Interestingly, SCM is an important aspect of civilization. Most of the world’s largest supply chains are marvels of teamwork and coordination. Brilliant SCM enables companies to achieve international growth; sure, not all business organizations have good motives, but SCM is an important tool for those trying to impact good globally. SCM within a well functioning society creates employment opportunities, decreases pollution, lowers energy use and improves the living standards.

It’s nice when gas prices stay low, and this is most definitely a result of excellent Supply Chain Management. But it’s natural calamities that need SCM the most. When hurricanes arrive unexpectedly, when tsunamis appear relentlessly, when tornados hit land, when droughts persist, such are the times when all resources and thought poured into SCM pay off greatly. Supplies can be taken to where they’re needed at surprising speeds, and that’s a beautiful thing.

Wrapping Up

Clearly, SCM has a significant impact on business and society as a whole. Looking to the future, it must be understood that supply chain management is always evolving. Emerging technologies and successful SCM techniques being used by businesses today form the foundation for future improvements in efficiency, cost savings and customer value addition.

Further reading: Supply Chain Digest

Business Management and Administration

Struggling businessman pushing a stone uphill.Management is working with people to progress organizational objectives. It makes processes function efficiently, smoothly and easily. Without management, businesses and other organizations would be in chaos and struggling to perform.

Being such an all-encompassing activity, management has diverse components. Different authors of books, magazines other publications understandably have different ways of looking at what management functions are.

Management Elements

It can be considered to all come down to 4 tasks: planning, organizing, controlling and supervising. Anything else (such as monitoring, directing and designing) can be considered sub or overlapping functions.

Planning

For anything needing to be completed, planning is always the first stage.

  • An adage which can be applied here is: “Failing to plan is planning to fail.”
  • Or as T Boone Pickens, the famous industrialist, said, “A fool with a plan will outsmart a genius without a plan.”

Planning is where the manager establishes the vision of the organization and sets goals, objectives and strategies towards achieving them (Just Business Today).

Organizing

Organizing is putting together the activities needed to attain objectives and deploying people to carry out tasks. Since the conditions affecting the organization’s pursuit of goals  are constantly changing, the organizing process will be in flux to adjust.

Controlling

Controlling is the management of processes to ensure standards are met satisfactorily. Standards, which are set during the planning stage, include budgets, sales quotas, product quality, and production volumes and costs.

Supervising

Among the 4 major functions of management, supervising often takes up the most time of a manager. It includes motivating and inspiring staff, coordinating job activities, instructing, training, guiding and providing counsel.

Project Management

Project management is the activity of defining and achieving specific objectives. The challenge in project management is to optimize the integration and allocation of inputs needed to meet the objectives. The project is a carefully selected set of tasks which use resources (such as people, time, capital, materials, energy and space) to meet goals.

The final objectives are defined in a negotiated agreement among project stakeholders, usually in the form of a charter or contract.

Often an individual project manager is responsible for seeing that outcomes are achieved. He or she may not participate directly in the activities which produce the end result. Instead, the manager works to keep tasks progressing and the different parts of the operation harmonized. Project managers also need to manage risk.

A project is a non-ongoing endeavor to create a product or service. It contrasts with processes (or operational) management, where the same product or service is created repeatedly. The two management systems can be very different and require different technical skills and philosophies.

Project Management Variables

Project management tries to gain control over 4 variables.

  1. The first, time, is typically broken down for analytical purposes into the time required to complete the components of the project. This can be further broken down into the time required to complete each task contributing to the completion of each component.
  2. The second is the cost of developing a project, which depends on variables such as labor and materials, risk management, plant, equipment.
  3. Another variable is scope – what the project is supposed to accomplish overall and a specific description of what the end result should be.
  4. And lastly are project risks – potential points for failure. Most negative risks (or potential failures) can normally be eliminated or minimized given enough planning capabilities, time and resources.

To properly control these variables a good project manager should have deep knowledge and experience in these 4 areas and in 6 others as well: integration, communication, human resources, quality assurance, schedule development, and procurement.

The key to effective project management is control. Project management tools are available to make it easier, including milestone tracking software. The project manager needs to keep the whole process on-track, on-time and within budget.