What are the 5 basic steps of supply chain management?

Supply chain management is a common phrase in the business environment.

When it comes to the definition, it simply means the management of the workflow of supplies, products, or services.

This workflow could happen between two parties (B2B, B2C), and locations. It traces the movement and inventory of the raw materials.

The supply chain visibility software comes with the available options for companies in many industries to process their own custom designs or modify the existing ones with specific frameworks that work well for them.

These are the basic steps of SCM in every company.

Planning

Planning is paramount. One needs to have a solid plan to control the inventory, business, and manufacturing process.

It is imperative to match the supplies with the aggregate number of demands. Using the analytics, the company will be able to source, make, and deliver.

But again, it is a dynamic process. When it comes to the demand aggregate, one should not think about the stagnant number. It is advisable to stay alert about the demand variations in the market.

For instance, certain companies are using supply chain analytics tools and planning to prepare the raw materials so that they will have a ready invenvoprty for their clients. It is a good move.

Each company should carefully plan and manage all of the resources to meet the customer demand. It is crucial to determine the specific metrics to measure the effectiveness of the supply chain.

The metrics can also help suppliers evaluate whether they have already given the deserved value to their partners and achieved the specific goals.

Sourcing

Sourcing revolves around the picking process of the suppliers who can produce the goods and services to meet the specific demand.

Obviously, the partner will want to have it in the most effective and efficient way.

The suppliers will need to procure the products and supplies according to certain standards.

Sourcing activity is comprehensive towards perishable products and non-perishable ones.

Perishable products (foods, drinks, chemicals, etc) have a minimum lead time. The suppliers must consider the minimal inventory approach.

On the other hand, there will be a quoted lead time for non-perishable products. The lead time should be less than the number of days of the empty inventory. Therefore, the suppliers need to keep adding supplies to the inventory before it reaches zero. It is important to do this to prevent a loss in revenue.

From the retail or client point of view, it is very crucial to choose responsible suppliers who can procure the goods and services needed to update the inventory. Real-time monitoring should also be prioritized.

The key processes in sourcing include ordering, receiving, inventory supply chain management , as well as payments for the supply.

Making

Based on the client’s requirements, the particular firm will conduct the production process, which involves the creation of the final product from the raw materials.

Obviously, it involves production activities such as assembling, testing, and packing.

Therefore, it is also imperative to pay attention to the client’s feedback regarding the products.

This feedback is beneficial for both parties. The specific company is able to improve its production process. Meanwhile, the clients will get much better products in the next order.

The making in the SCM starts with accepting raw materials, then transforming them into products, quality checking, packaging, and shipping.

Delivering

Delivering is also an integral part of the SCM. The delivery of the products and services has a direct influence on the brand awareness and reputation of the particular firm.

Back then, clients had specific requirements for goods and services. The products delivered by the firm should meet their expectations through the logistics partners.

Keep in mind that we are talking about the SCM itself. So, it is important for the company to pay attention to the high quality of delivery, including the utilization of freight options.

The firm must be able to manage the orders, neatly create the delivery schedule, load and unload, invoice the clients, and receive payments from the clients.

Returning

The SCM does not end at the client’s address. There’s a possibility that the product movement will still continue, especially in reverse.

It has to do with the post-delivery firm’s support in the returned products process. Sometimes, the products that the clients receive are wrong, broken, or else. When there’s a problem like this, the clients will return the products back to the suppliers.

This process is also known as Reverse Logistics.

Reverse logistics is an important element to add to the SCM to maintain good relationships between the suppliers and the clients.

It is the process which allows clients to conduct the same action towards the supplier. The clients will return the products for sensible reasons: low quality, wrong items, defective, expired, or other problems. The suppliers or vendors will receive the troubled items and deliver the other items in order to reclaim the customer’s needs.

It is imperative to create a working framework to receive unwanted products.

Verdict

Those are the crucial elements of SCM that firm owners need to comprehend in order to make the right decisions. Each element in the SCM is important for making an informed decision, especially for the supply chain quality.

Since early 2020, the trend of digital transformation has been pushing many companies to take advantage of digital tools to help them make the SCM more effective.

The firm leaders must consider taking advantage of the digital transformation to get advantageous processes in their firm.

Quality improvement does not derive from a complicated supply chain management process. On the contrary, simplification is the main principle of improvement in product and service quality.

If you are ready to take your business to the next level, you must be ready to change the current supply chain strategies in new directions. The leader must know the principles and knowledge of the SCM with specialization on a global scale if they want to take part in the global market.