What is supply chain management?

What is supply chain management?

Optimise your supply chain with our help

Supply chain management is a cross-functional approach that includes managing the movement of raw materials into an organisation, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organisation and towards the end consumer.  Often, an organisation’s suppliers also have their own suppliers, and equally, their customers may not be the final consumer – as illustrated in this simple example.

Supply Chain Management focuses on the value for organisations in considering all of the links in the chain in an integrated way, rather than focusing on single steps. 

  • How reliable is your supplier’s supplier? 
  • Do they comply with the value set of your organisation? 
  • How flexible does your customer need you to be based on their onwards sales model?

As organisations strive to focus on core competencies and become more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other firms that can perform the activities better or more cost effectively, for example, due to their scale (they have a large customer base and can therefore achieve economies), scope (they are already operating in a particular market) or expertise (they have already developed the necessary technology).

The effect is to increase the number of organisations involved in satisfying customer demand, while reducing managerial control of daily logistics operations.

Less control and more supply chain partners lead to the creation of the concept of supply chain management. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement.  Control of and visibility into your supply chain is increasing a more powerful source of competitive advantages.

To deliver market-leading agility, supply chain leaders have spent years digitising processes, optimising workflows, and introducing analytics to better understand past events so they can take more informed actions in the future.  Despite enormous investments of time, budget and resources, many supply chains are still optimized in functional silos. Collaboration across functions and organisations for them is hampered by traditional manual processes. And supply chains of that type could still be struggling to meet the needs of the business and the expectations of customers.

The next phase of transformation will require supply chains that are dynamic, responsive and interconnected across ecosystems and processes. Moving forward, you will need to take even bolder strides to drive efficiencies and be resilient to disruptions.  From Artificial Intelligence to simple RPA (Robot Process Automation), it is increasingly possible to build intelligent, self-correcting supply chains that deepen your competitive advantage whilst mitigating risk and adding resilience against whatever the future holds.

Deciding what an organisation should in-source or out-source, how to plan, procure and manage the ordering of goods and services, and how to make sure your supply chain is adaptable and responsible is a challenge for every modern procurement function.  Contact Barkers to find out how we help clients optimise their approach to supply chain management.

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