What are components and functions of supply chain management?

Supply chain management can be said to have 5 attributes or components that need to be looked into to ensure sustainability and effectiveness. What are these components that define a successful supply chain management strategy?

1. Planning. Planning process are the critical to allow supply chains to operate at maximum efficiency. Proper planning allows for both inventory and operational resource levelling. Controlling supply by source planning and managing demand by demand planning allows the organization to have a better handle on cash flow and ability to meet customer needs. Data that churns from the planning process also allows companies consolidate shipments to enjoy better economies of scale and even indulge in some predictive analytics to enjoy more accurate forward looking projections.

2. Sourcing. In any organizational set-up it is always ideal to work with vendors who are not only capable but also able to adapt to the customer’s requirements and preferences. Vendors must also be able to consistently meet demand, especially during seasonal surges and not expect the customer to place orders during seasonal lulls. It goes without saying that the vendor must also adhere to required specifications of the customer and be able to identify non-conformance to standard to their end, before the product is shipped out to the customer. When negotiating with vendors, it is best to align on delivery lead times and order lead times, with clear expectations of performance expectations.

3. Making. The making process can involve actual raw material to finished goods manufacturing or it can include repackaging, re-kitting, bundling, assembling, dressing or staging. This process must be optimized for to create minimum variance in outcomes (increase predictability of the process itself), to minimize or eliminate non-conformance to customer requirements. The manufacturing process is almost always a space for continuous improvement even in the most high tech of automated production lines.

4. Delivering. The delivery channel must be robust and stable. It must be able to bear the load of sudden spikes in demand and have business continuity procedures in place for common logistics problems such as port congestions or inclement weather. In many organizations, the supply chain function is low in priority when compared to a sales function, however it must be given funding to improve itself to keep up with business needs.

5. Returning. It is inevitable that customer will want to return product. This could occur due to a variety of reasons such as damage, non-conformance to quality specifications, defective products, products nearing or past expiry dates or erroneous products/quantities being shipped. The return process is a critical component of the customer experience and is closely related to the refund process.

If the company gains a reputation of having poor reverse logistics capabilities, customers will inevitably be wary of purchasing high value products.

A final note

The components discussed above look at the aspects of moving physical products. However, there are several other aspects that need to be considered to derive an accurate assessment of a company’s SCM capability. These could include compliance (capability in HS classification, valuation), regulatory (awareness in licensing requirements), quality (processes and product specifications) and finally ethics and compliance. This is not an exhaustive list!

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