What are the elements of supply chains?
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Manufacturing businesses have long referred to the process of getting goods to customers as the supply chain. However, since so many businesses rely on manufacturers, the term has made its way into the corporate world, as well. There are four major elements of supply chain management: integration, operations, purchasing and distribution. Each relies on the others to provide a seamless path from plan to completion as affordably as possible. Show
Element One: IntegrationAs with any project, planning is essential to long-term success. Part of good planning is setting up integration, which means that everyone involved in the manufacturing process communicates and collaborates. Instead of functioning in separate divisions, or silos, integrated teams work together to make sure the product gets to the distribution phase. This improved communication reduces errors that cost time and money. Since everyone is working together, leaders can also monitor the entire operation and easily identify areas along the supply chain that can be improved. Element Two: OperationsAs important as strategy is to keeping a strong supply chain, day-to-day operations are the backbone of the work manufacturers do. Managers monitor the work being performed and make sure everything remains on track. Many of today’s manufacturers operate using lean manufacturing strategies, which means that processes are constantly evaluated to identify where things can be done more efficiently. Whether it’s monitoring equipment to make sure you’re getting the most out of it or cutting back work hours when production slows down, the operations team can bring major improvements to the supply chain. Element Three: PurchasingYou can’t make something from nothing. The purchasing area of supply chain management makes sure a company has everything it needs to manufacture products, including materials, supplies, tools and equipment. This means often staying ahead of the process so that you have everything you need on hand well before you actually need it. Without the right purchasing personnel, you could find that you end up running out of the materials you need, delaying production, or that you overbuy and strain the company’s budget. Element Four: DistributionThe supply chain ends when the product lands on store shelves where customers can buy them or their front door (if they purchase them online). But getting products there means having a well-planned shipping process. Most companies today use logistics software to manage their shipments, whether they handle it on their own or source shipping to a third-party provider. When handled correctly, products are moved expeditiously from the warehouse to the customer.
Stephanie Faris is a novelist and business writer whose work has appeared on numerous small business blogs, including Zappos, GoDaddy, 99Designs, and the Intuit Small Business Blog. She worked for the State of Tennessee for 19 years, the latter six of which were spent as a supervisor. She has written about business for entrepreneurs and marketing firms since 2011. The growing supply chain management (SCM) software market speaks volumes about the ever-increasing importance of SCM within procurement. In fact, the supply chain management market is already valued at $37.41 billion. And that’s not all. The projected Compound Annual Growth Rate (CAGR) is 11.2% from 2020 to 2027. It is also evident from Google’s search volumes that people are keen to understand what is supply chain management and what are its key components. We’re here to answer both of those questions. What is Supply Chain Management?The Chartered Institute of Procurement and Supply (CIPS) defines supply chain management (SCM) as: “…the handling of the flow of goods and services from the raw manufacturing of the product through to the consumption by the consumer.” The supply chain is itself defined as: “…a channel of goods distribution, which starts with the supplier of raw materials or components, moves through an operational process to the distributor and retailer, and finally to the consumer.” These two terms and their relationship can be illustrated as follows:  The 5 Components of Supply Chain ManagementManagement of the entire supply chain is an arduous task; however, it can be partitioned into five major parts which we are going to examine below. Component 1: PlanningOne of the biggest questions procurement teams need to ask is whether the organization plans to manufacture goods themselves or they will buy ready-made goods. In the event that the company manufactures finished products, the next question that arises is where will raw materials be sourced? Will it be from local, regional, or international suppliers? This question is also posed if the company is purchasing ready-made products and passing them to the consumer in a finished state. From where will these products be obtained? Component 2: SourcingFollowing on the heels of the first component is the second step which involves sourcing. This step is one of the most critical of the entire supply chain as it is at this stage that the biggest cost savings can be achieved. Choose the right vendor offering the ideal price and who has the capacity to deliver required volumes in a timely fashion and you’ve struck gold. Select an incompetent supplier and this will affect operations along the entire supply chain. This process will also include the need to not only find vendors but evaluate and qualify them. Component 3: InventoryHaving several suppliers so you can secure enough raw materials and or products so you can remain fully stocked up is extremely important. There are numerous lessons to be derived by examining purchasing and supply chain management in 2020. 2020 demonstrated the importance of getting this component correct. According to RetailNext, 28% of surveyed businesses suffered severe shortages and even went out-of-stock of certain key items. 56% of these enterprises had to renegotiate contracts. The ability to carefully manage inventory and ensure that manufacturing schedules are in alignment with consumer demand is as much a skill as it is an art. Component 4: Production and TransportationThe next important component in supply chain management is production, warehouse, and transportation. This element of the supply chain takes a look at what is needed to ensure that the organization is producing the correct volume of products and that product quality meets established standards. This component also factors in where the products will be kept i.e. storage in warehouses as well as transportation from said depots to stores that will retain the products. Component 5: Return of GoodsWhat do you do when a customer returns a product that’s faulty? What is the protocol to handle such an incident? These questions are answered in the final component of the supply chain ‘Return of Goods’. Because customer satisfaction is extremely important, it is imperative that there be a clearly defined protocol surrounding the returns process. The more efficient the return of faulty product processes the higher your customer satisfaction ratings. ConclusionKnowing these five components of supply chain management makes it possible to develop effective strategies to manage your activities more efficiently. Supply chain management is so critical in any organization’s bottom line. And being able to see how each link fits in the chain – how each stakeholder and supplier plays a pivotal role in the overall chain – will give you the necessary insight to make decisions that benefit everyone involved. One of the first steps to improving supplier relationships is through the integration of innovative supplier management software such as that provided by ProcurePort. ProcurePort is a trusted procurement solutions provider whose clients include UNOPS, HUD.GOV, and conEdison. To discuss procurement software with a consultant or to schedule a demo of our solutions, contact us today. What are the 5 elements of supply chain management?Supply chain management has five key elements—planning, sourcing raw materials, manufacturing, delivery, and returns. The planning phase refers to developing an overall strategy for the supply chain, while the other four elements specialize in the key requirements for executing that plan.
What are the top 3 elements of supply chain?Generally the key aspects of Supply Chain management are Purchasing (sourcing), Planning (scheduling) and Logistics (delivery). Sometimes logistics is separate, and procurement may be included with Purchasing, depending upon how location specific the procurement activities are.
How many elements are in a supply chain?Your supply chain efficiency and effectiveness make a massive impact on the overall success of any business.
What are the 10 elements of supply chain management?What are the 10 Basic Elements of Supply Chain Management?. Integration. Every business needs strategic planning for the better functioning of operations. ... . Operations. ... . Purchasing. ... . Distribution. ... . Agility. ... . Innovation. ... . Performance Measurement. ... . Alignment.. |
