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What Is Supply Chain Management?

The importance of supply chain management (SCM) cannot be understated.

It is an essential part of business operations and it can have a tremendous impact on the success or failure of an organisation.

But what is supply chain management, how does SCM work and is compliance an important part of the supply chain process? Keep reading to find out.

What Is Supply Chain Management (SCM)?

A simple definition of supply chain management is the management of the flow of goods and services from their point of origin to their point of consumption.

Supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management.

SCM comprises the movement and storage of raw materials, work-in-process inventory, and finished goods from the point of origin to the point of consumption.

Through supply chain management, companies can streamline operations and better manage inventory, which reduces costs and increases efficiency. This is done by improving coordination and collaboration between channel partners, which can be suppliers, intermediaries, third-party service providers, and customers.

How Does Supply Chain Management Work?

A traditional supply chain functions by having a company acquire raw materials, convert them into products, and then move them to their customers.

Supply chain management involves all of these steps, plus many more. It’s not just about getting the product from point A to B; it’s also about managing logistics and inventory, as well as monitoring customer demand and forecasting future needs.

Efficient supply chain management involves overseeing the entire movement of goods and services from the supplier to the customer, including planning and controlling activities. 

These can include procurement, production, inventory management, distribution, sales, and customer service.

The ultimate goal of SCM is to ensure that goods are delivered on time and in an efficient and cost-effective manner.

Why Is Compliance Important In Supply Chains?

Remaining compliant with industry regulations, standards and laws is key to any supply chain strategy, as it helps to protect the company’s reputation, manage risks and ensure safety.

Compliance is especially important in sectors that are heavily regulated such as the construction industry. Compliance in construction can help to ensure that projects are completed on time, within budget, and with high safety standards.

Supply chain management plays an important role in helping companies remain compliant by providing visibility into the entire process – from sourcing materials to delivery of the completed product. This makes it easier to track each step of the process, identify potential risks and take action quickly to ensure compliance.

Any supplier functioning within a global supply chain will have to demonstrate their compliance with the relevant laws and regulations in order to keep contracts with upcoming projects, otherwise, an alternative supplier may be chosen.

What Are The Five Categories Of The Supply Chain Processes?

There are several stages within the supply chain management process that must be considered by a supply chain manager, who coordinates all the aspects of the supply chain.

The five different processes within supply chain management are:

1) Plan

2) Source

3) Manufacture

4) Deliver

5) Return

Let’s look at each in more detail.

1) Plan

Planning is the most integral aspect of supply chain management and it involves forecasting customer demand, setting production goals, scheduling resources and inventory management.

This step requires supply chain managers to predict the future needs of their customers and manufacturers and plan to source enough raw materials accordingly for each step.

The planning process also must consider staffing, equipment capacity, limitations and manufacturing at each individual stage of the process.

2) Source

Once the supply chain plan has been mapped out, raw materials must be sourced from suppliers.

The sourcing process involves researching and selecting vendors, negotiating contracts, setting up payment plans and signing agreements. This step is critical as it ensures that the raw materials are available for production in a timely manner without breaking the budget.

A supply chain manager must:

  • Identify raw materials that meet manufacturing specifications at prices that are in line with market expectations
  • Locate a flexible supplier that can meet demand, including emergency materials amidst unforeseen events.
  • Ensure the supplier is compliant with industry regulations and has a proven track record of delivering goods on time

Buyers in the construction industry looking to find compliant suppliers can do so using the Compliance Chain platform – but more on that later on.

3) Manufacture

The third step of the supply chain process involves transforming raw materials into a finished product. This requires manufacturers to have access to the right equipment and staff, all while conducting frequent quality checks throughout the production process.

In this step, suppliers must be sure that they are able to meet customer demands on time while maintaining high levels of quality and safety standards.

The manufacturing process of supply chain management could be divided further to induce the assembly, testing, inspection and packaging processes that play a vital part in almost every industry.

4) Deliver

Once production is complete, the finished products must be delivered to their customers. The delivery process involves organising shipments, managing inventory levels and ensuring timely deliveries.

This is the first step of SCM where brand image is an important aspect to consider, as before now the customer has not yet interacted with the product or its brand.

Companies with efficient supply chain management processes will look to make the deliveries as timely, safe and inexpensive as possible through their strong logistic capabilities.

5) Return

The final part of supply chain management is related to returns of all kinds. 

Also known as ‘reverse logistics’, this process is one of the most important aspects to consider to avoid a deteriorating relationship with customers.

This process involves managing the return of defective goods, unused inventory and expired products to vendors or suppliers. It also covers handling customer complaints through refunds, replacements and repairs as necessary.

A part that can sometimes be overlooked is that the supply chain manager must identify at what point in the SCM process why the goods are defective, expired or non-conforming. Only by addressing the underlying cause of the return can the supply chain management process return to being a success.

Different Supply Chain Models

While the processes can be similar, SCM does not look the same at every company.

As is the nature of business, each company has their own unique supply chain management system that is tailored to its industry and production needs.

Continuous Flow Model:

The most traditional supply chain method, the Continuous Flow Model is one where companies run a linear process from supplier to customer. This model expects that customer demand will not fluctuate to unexpected levels.

Fast Model:

Quick turnover is an essential aspect of the Fast Model as the products typically have a short life cycle. Meeting demand for trends and new releases is the main focus of this model.

Flexible Model: 

A flexible supply chain can easily increase or decrease production to meet unpredictable demand. Companies functioning under the Flexible Models tend to rely on seasonality and customer trends in order to meet market needs.

Efficient Model: 

Companies functioning under an Efficient Model depend on using machinery and equipment in the most efficient way possible in order to reduce costs. Due to profit margins typically being tight under this model, reducing expenses and waste is a key priority.

Agile Model: 

Flexibility is a key priority in this model as customers’ demands can change quickly. The Agile Model requires the ability to make fast and accurate decisions in order to respond to those changes accordingly. The difference between the Agile Model and the Flexible Model is that the Agile Model does not require any prior knowledge of demand.

Custom Model: 

Highly specialised industries tend to use a Custom Model due to their unique production needs.

What is the best supply chain management platform?

Compliance is an important part of keeping the supply chain running smoothly, protecting businesses from risk, and maintaining customer trust.

Companies can use compliance management software (like Compliance Chain) to help monitor their supply chains for risks related to quality assurance, safety and legal compliance.

Compliance Chain offers end-to-end supply chain management tools to help companies identify, assess, and monitor any risks in their supply chains that could put them at risk of non-compliance.

Whether you’re a buyer or a supplier, the platform helps businesses within the construction industry ensure that they are adhering to all applicable regulations and standards throughout the entire chain, from social value to sustainability and more.

Gold members can gain extra access to assets that will showcase their industry compliance and make them more visible to potential clients.

For example, suppliers of building materials with gold membership can demonstrate their compliance with PAS91 and Common Assessment Standard, all while gaining access to Meet the Buyer events that put them in front of leading Principal Contractors across the UK.

Discover more about Compliance Chain Gold by signing up today.

To learn more about Compliance Chain, supply chain management or how the platform can help you, contact us today.  We’ll happily answer any of your questions and find a solution that best fits your company’s needs.

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