8 Supply Chain Processes

[Colby DuLin]

Fromraw materials to consumer goods, supply chain management (SCM) encompasses the entire process of assembling and delivering a sellable product. SCM includes the disciplines of supply planning, product planning, demand planning, sales and operations (S&OP) planning, and supply management.

2. Unify supply chain planning with enterprise planning

A vital second step is connecting traditionally siloed supply chain planning to sales and operations planning and financial planning. Companies can benefit from synchronizing their short-term operational planning with their wider business planning processes to make real-time updates to inventory forecasts and supply.

Deploying real-time S&OP solutions that enable enterprise-wide collaboration means that key stakeholders across the business can create new scenarios and quickly assess how to use their resources to optimize profitability.

3. Anticipate the demand of the end customer

For consumer packaged-goods companies, anticipating what customers want and when they want it is an ongoing challenge. A solution like Anaplan allows end-to-end visibility across the supply chain and beyond an existing network of wholesalers and retailers to sense demand signals from customers.

When changing consumer sentiments can be rapidly identified and changes to demand for the product assessed, the company, partners, and customers benefit from improved profitability, margins, and lead time.

With an eye on financial and business impact, the goal of S&OP is to enable executives to make better-informed decisions through a dynamic connection of plans and strategies across the business. Often repeated monthly, S&OP enables effective SCM and focuses the resources of an organization on delivering what their customers need while remaining profitable.

The many-faceted role of a supply chain leader is changing as we speak. To thrive in this new world, supply chain professionals should grow their capacities in collaboration, communication, and leadership, and pair those skills with in-depth technical knowledge to become a powerful force for the future of SCM software.

History-based forecasting is used to drive supply chain planning, but artificial intelligence (AI) and machine learning (ML) are primed to change that forever. AI- and ML-based predictive models will transform processes like demand sensing, shaping, and orchestration, as well as supply planning. AI will begin to drive dynamic pricing, and new product introductions will be based on predictive market intelligence. AI and ML will also drive new models for product promotions management, as well as responses to disruptions in the supply chain.

With the continued risk of high-profile hacks that compromise the information of millions of consumers, companies will need to raise the standards of their privacy and protection protocols. Macroeconomic concerns, political instability, oil prices, and resource availability will all require action across the enterprise, including within the supply chain. As a result, supply chain planners will need sophisticated modeling capabilities to plan for all potential scenarios.

Supply chain managers are always looking for new ways to take advantage of opportunities and to overcome obstacles as the modern supply chain evolves. With a connected supply chain planning approach and the use of new technologies, data is brought together, and more people are integrated into decision-making processes. As the supply chain of the future comes into view, these trends will play a key role in supply chain transformation.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Supply chain management (SCM) is the oversight and control of all the activities required for a company to convert raw materials into finished products that are then sold to users. It provides centralized control for the planning, design, manufacturing, inventory, and distribution phases required to produce and sell a company's products.

A goal of supply chain management is to improve efficiency by coordinating the efforts of the various entities in the supply chain. This can result in a company achieving a competitive advantage over its rivals and enhancing the quality of the products it produces. Both can lead to increased sales and revenue.

A supply chain begins with the sourcing of raw materials. The raw materials are then hauled to a wholesaler that sells them in batches to manufacturers. The manufacturer uses the materials to create a product which is then delivered to a retailer. Finally, it's sold to a consumer.

Supply chain management is important because it can help achieve several business objectives. For instance, controlling manufacturing processes can improve product quality, reducing the risk of recalls and lawsuits while helping to build a strong consumer brand. At the same time, control over shipping procedures can improve customer service by avoiding costly shortages or periods of inventory oversupply. Overall, supply chain management provides multiple opportunities for companies to improve their profit margins and is especially important for businesses with large and international operations.

Effective supply chain management minimizes costs, waste and time in the production cycle. It directly impacts profitability and allows businesses to gain a competitive advantage in today's global marketplace. One study found that organizations with advanced SCM capabilities were 23% more profitable than their peers.2

Supply chain management also helps companies anticipate and mitigate risks (such as supply chain disruptions) and track compliance with regulations and standards. By helping products arrive on time and in good condition, supply chain management can improve customer satisfaction and loyalty.

The importance of supply chain management is also evident amid growing awareness about climate change. Sustainable supply chain management can help companies reduce their carbon footprint and impact on the environment by optimizing logistics and energy management, and reducing waste.

Planning involves forecasting demand, arranging production and managing inventory levels to ensure that the right products are ready to meet customer demand. It also involves setting an overall SCM strategy by determining metrics to measure whether the supply chain is efficient, effective and meets company goals. And it includes adapting to new product needs.

Sourcing involves identifying which providers to work with, negotiating contracts and managing supplier relationships to ensure a reliable supply of raw materials and components. The work includes ordering, receiving, managing inventory and authorizing supplier payments.

Handling returns involves creating a network or process to take back defective, excess or end-of-lifecycle products. It includes managing reverse logistics and customer satisfaction, in addition to final product disposal.

This approach focuses on eliminating waste in all forms, including excess inventory, unnecessary transportation and inefficient processes. The goal is to create a streamlined, cost-effective supply chain.

This approach emphasizes quick response to changes in customer demand and market conditions. It often involves practices such as quick batch production, rapid replenishment and flexible supplier contracts.

This approach is data-driven and aims to eliminate defects and reduce variability in supply chain processes. It uses statistical methods to identify and remove the causes of errors and minimize variability in manufacturing and business processes.

This approach focuses on improving quality throughout the supply chain, with the goal of increasing customer satisfaction. It involves continuous improvement efforts and often includes practices such as supplier quality management and process standardization.

This approach focuses on building a supply chain that can withstand disruptions and adapt to changing conditions. It focuses on identifying potential risks in the supply chain and developing strategies to mitigate them. These strategies might include diversifying suppliers, creating contingency plans and investing in supply chain visibility tools.

This approach focuses on minimizing the environmental impact of the supply chain and promoting social responsibility. It can involve practices such as sustainable procurement and participation in the circular economy.

This approach uses technologies such as artificial intelligence (AI), machine learning (ML), Internet of Things (IoT) and advanced analytics to enhance various aspects of supply chain management, including demand forecasting, inventory management and logistics.

Supply chain managers play a critical role in maintaining the smooth operation of the supply chain. They are responsible for planning, implementing and controlling the efficient and effective flow of goods, services and information from the point of origin to the point of consumption.

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