Gone are the days when procurement, manufacturing, and order fulfillment remained unconnected. Often these departments didn’t even communicate with each other regularly and this led to a lot of waste. Sometimes there were not enough raw materials when there was a high demand for finished goods. The people who managed warehouses were not aware of what orders were coming. All these problems are solved because these processes have come under one system – supply chain management.
What Is Supply Chain Management?
Simply put, SCM is a way to regulate the flow of goods in a company from sourcing raw materials to delivering finished products. It will include all resources and technology required to complete the process successfully. Online supply chain management courses will teach in detail about this process and what is required to successfully perform this job. Know more about this course here.
There are several activities that come under this department. Various contracts and documents must be prepared between various entities that are part of it. Items must move from one location to another for which transport must be arranged. Both raw materials and finished goods must be stored securely. This requires warehouses and systems to maintain inventory. Distribution networks to reach buyers must also be in place.
Understanding The Importance of Supply Chain Management (SCM)
The primary aim of SCM is to reduce costs and improve customer satisfaction. In a highly competitive market, most firms are working with very low margins. This makes it essential to reduce costs wherever possible. This process helps in reducing procurement costs by collaborating with suppliers. Maintaining optimum stock levels is another way to save money. Companies can save a lot by keeping low inventories of slow-moving goods. This will also help in reducing storage costs.
The onus of reducing production costs is on these managers. Shutdowns in manufacturing can cost a company heavily. Supply chain managers ensure the continuous availability of raw materials. They must also make sure that production is done as per demand. Analytics can help in forecasting product demand to help in better planning. Students of IIMK online courses in supply chain management know that arranging for timely and low-cost transport is also part of this process. One can know more about this course here.
Another important area that SCM takes care of is customer loyalty. Order fulfillment is an important task to be done perfectly. Not honoring an order or making mistakes in sending goods can result in losing buyers. There are so many choices for buyers that it is easy for them to find another company to buy their needs. Their demands with regard to price and delivery are ever-increasing and only with proper supply chain management can these be met.
Having known its importance it is now time to look at the various types of planning required to have successful logistics network management.
1. Strategic Planning Process
Any student of online supply chain management courses can tell you that the first step is to design a supply chain. Companies must decide on various aspects such as locations of warehouses, transportation facilities, and other resources needed to put this process in place. A well-designed logistics network procedure with every step documented well will help in responding to any requirement quickly. It will also help tackle unexpected situations.
Another area that needs proper planning is the source of raw materials for production. Organizations must identify a minimum number of suppliers who can ensure a regular supply of materials. It is also vital to ensure that these are purchased at the best prices without any compromise on quality. Analyzing vendors will help to identify the most suitable ones. Once this is done it is also essential to put in place a strategic sourcing process.
2. Demand Planning Process
IIM online courses in supply chain management stress the need to have proper planning when it comes to production and this is possible only if companies can forecast product demand. An excellent way to predict future sales is to use analytics. In this method past data is used to find patterns. This will give clear indications about fluctuations in sales. It will become possible to plan manufacturing in such a way that there is always enough supply of goods, but no excess stock.
Along with planning production, knowing sales patterns also help in formulating marketing plans. Depending on which products will need to be promoted at what times, promotional activities can be planned. Historical data can be used for this too. Companies must see which campaigns have given them better results. They can then plan similar promotions but with present market conditions in mind. All information received from forecasting, promotion planning, available budgets, and sales planning is used to make a demand plan.
3. Supply Planning Process
As the name suggests this is a process where all matters with regard to supplying raw materials and finished goods are finalized. This involves planning supply networks, collaboration with vendors and suppliers, minimum stock planning, outsourcing, and distribution planning. All these are concerned with product movement. Companies must ensure that enough quantities of various items are available at all locations to meet demands. This can be either production demand or customer requirement.
Online supply chain management courses give a lot of importance to appointing distributors at various locations. Without them, it is not possible for a firm to meet customer demands. Proper agreements should be made with these agencies and decisions on required stock levels should be arrived at. Companies must also see if getting outsourcing products or services are more profitable than performing these themselves. Along with all these, it is also necessary to plan modalities for delivering goods to various locations.
Once planning is done, it is now possible to create the required infrastructure and place people for managing supply chains. If the initial planning is successful, then everything will move like clockwork without any hitches.
Those who are attending IIM online courses in supply chain management and planning for a career in this field must make sure that everything is in place before actually putting the process into practice.