As we defined in a previous post, supply chain management (SCM) is:
“the management of a network of interconnected businesses involved in the provision of product and service packages required by the end customers in a supply chain. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption”.
[Source: Wikipedia]
To achieve the best supply chain management processes for your organisation, there are several steps to work through:
Step One: Define your Supply Chain Management loop
1 Plan your strategy
What is your company’s product and delivery strategy?
This question should always be analysed alongside how can my company meet customer demand?
Both areas need to align to ensure your business can rely on a process which is realistic and also within market expectations.
Do you have metrics to measure how successful your supply chain is? (How many missed orders, delivery complaints etc).
2 Source the supplier
Who provides the best quality / best price?
Are they reliable?
Agree on delivery terms, returns policy and transportation costs from an early stage.
Internally you also need to develop processes for handling inventory and storage. Do you know how much your warehouse can store of each item on your inventory?
Do you have a backup supplier if issues arise? Do you have quality control in place if you decide to switch providers?
Building relationships with key suppliers should be an ongoing management strategy.
Try to avoid relying on one provider – if they stop doing business, how would this impact yours?
3 Manufacture
This is the manufacturing process if your business builds items and includes production, testing and packaging etc. For all other businesses, this is the packing and quality control component.
Well-tuned inventory and warehouse processes should reduce and eliminate wastage or missing items.
This area can make or break the entire business operations – awaiting one part to finish production of an item can create a poor impression of your organisation.
4 Deliver
How will the products reach the customer? Will they be shipped to a regional warehouse or distribution centre first?
What is the time scale from the point of order to when the customer receives the product?
Review the customer service levels; what feedback are you receiving regarding your delivery times and levels?
5 Return
Developing a robust returns policy is key to closing the customer service and supply chain loop.
All organisations will face returns of their product at some point, and the way that this process is handled can boost or detract from the overall brand image of your company. How quickly does your company handle returns?
Step Two: Review your current supply chain process
Using the above steps, review your organisation’s current methods and processes.
Do you have answers to the above questions? Are you relying on too many spreadsheets to fulfil deliveries? Is each department liaising with each other along the supply chain?
Does quality control provide feedback to the warehouse on complaints about packaging? Does the warehouse manager have regular meetings with the purchasing team to ensure required stock is available when needed?
Step Three: Can any processes be automated?
The answer to this is most definitely ‘yes’ for most, if not all organisations. But reviewing each stage of your supply chain (as defined in step 2) will help you to prioritise the most important processes which can be automated.
A good pointer is to look for areas where you are relying on too many spreadsheets and where mistakes are happening because several departments are accessing the same (but often incorrect) data.
Some basic processes which can be automated include:
Stock level indicators
Sending an alert to the warehouse manager and purchasing team (as well as accounts) that you only have a minimum number of items left in stock and automatically setting up a new order from the supplier.Delivery notifications
Sending updates to your customers about when an order has been received, processed and shipped can enhance your customer service operations.Supplier invoicing
Establishing an ongoing relationship with the supplier can also help the finances with extended credit terms.
Step Four: Take Action!
You should now have a very clear idea of the basic supply chain your company follows, how effective the processes are, and the areas where improvements can be made. Following this analysis you are now ready to take significant action in ensuring all elements work together.
More companies are turning to an ERP system such as SAP for their supply chain management needs because they know that whilst improving their supply chain processes, SAP also has a far reaching effect over all business areas.
[Read our recent post here about the role SAP has to play in supply chain management]
How many versions of the truth is your organisation currently relying on?
Speak with Blue Ocean Systems team of expert consultants today about how SAP can enhance your supply chain management processes (and more).
[Images courtesy SAP]