Supply chain management – definition
Let us start with what Supply Chain Management (SCM) actually is. This term encompasses all the processes involved in managing the flow of data, money, and goods from the purchase of raw materials to the delivery of finished products or services to customers.
Effective supply chain management is supported by advanced tools and systems, such as SAP. It includes, among other things, processes related to sourcing, design, production, storage, and transportation. By improving their efficiency, a company can increase its opportunities on the market and gain an edge over the competition.
Logistics and supply chain management – benefits
But there are many more benefits to efficient supply chain management. It is a way to ensure customer loyalty while optimizing costs. Using a functional SAP system to automate and streamline business processes is a step toward smart and efficient management. What other advantages does it bring?
- ease of performing intelligent analyses
- greater flexibility
- increased productivity and efficiency of machines
- improved process transparency and product quality
- improved responsiveness to customer opinions and needs
- higher quality of products and services
- higher level of customer service
Supply chain management requires flexibility and openness to change. The technology supporting this process is constantly evolving, based on the needs of companies and the challenges they face. This helps limit the negative impact of changes in supply chains, such as those associated with the current economic situation.
To minimize the impact of external factors on the stability of the supply chain, it is important to make decisions based on the available data or artificial intelligence-powered analytics. The SAP S/4HANA system uses the latest technological advances to:
- effectively predict delivery dates using predictive analytics
- support transportation planning with quick insight into sales and purchase orders in one system
- efficiently control inventory in warehouses
- streamline the flow of materials in inbound and outbound transactions
- manage availability and proof of delivery with barcode and RFID integration
- track materials with unique identifiers and professionally manage material batches and serial numbers
Supply chain management methods
In order for supply chain management to be effective, it must follow several basic principles. One of them is ensuring an efficient IT infrastructure. An advanced, functional SAP system promotes faster execution of individual activities and thus more efficient processes at every stage of the flow of goods and services.
The efficient flow of information between cooperating units is also important. It harmonizes the activities of subsequent links in the supply chain, which is an important factor in reducing costs related to production, distribution, and more. Supply chain management concepts are also based on analyzing and meeting the needs of all links. With the latest version of SAP S/4HANA software, you can not only collect huge amounts of data from complex production or logistics processes, but also analyze it in real time. It also allows you to optimize processes related to warehouse inventory levels, cross-docking, and distribution on an ongoing basis from an easy-to-use application. It also has a simulation function that can, for example, help to plan material requirements more efficiently.
The effective integration of all supply chain processes into a single system can lead to an improved experience for all users and greater involvement throughout the cycle from planning to execution. Customer expectations are also of great importance. They should be taken into account in SCM.
Strategies of supply chain management
The choice of a supply chain management method is critical to the operational efficiency of any business. It depends, among other things, on the characteristics of the product, the length of individual processes, and the current market situation. In the case of easily predictable and constant demand and standard products, the LM (Lean Management) method is often used. It is mainly focused on reducing inefficient and unnecessary processes to decrease costs.
Agile supply chain management is based on a flexible approach. This is an excellent choice when market conditions are subject to dynamic changes and the goal of the entrepreneur is to quickly adapt to them. One of the most popular strategies is Leagile – a method that combines the two approaches described above. It is worth using if you have a long supply chain and demand is difficult to estimate.
Effective supply chain management – basic elements
There can be no effective supply chain management without basic processes such as planning activities, coordinating relationships, and forecasting demand. PLM, or product lifecycle management, from design to disposal, is also an important element for the efficient operation of a company. Eliminating supply surpluses and shortages is also of great importance. It is an effective way to reduce costs, as is efficient transportation and machine management. What else constitutes effective supply chain management? Undoubtedly, close monitoring of production processes and their automation.
A modern supply chain is not only the flow of goods, products, and services, but also (or perhaps most importantly) the flow of information. A single application that can manage complex data in real time and draw conclusions from it can improve a company’s bottom line and help predict and prevent crises. The implementation of the SAP system enables the optimization of the supply chain, and the modular structure makes it possible to implement it in parallel and reap the benefits even before the digital transformation of the entire company.
SCM is constantly changing, adapting to the needs of enterprises from many industries. Intelligent, transparent, and flexible supply chain management is enabled by modern systems that increase process responsiveness and efficiency of business operations. They make it possible to align SCM with consumer expectations, thereby increasing a company’s chances of market success.