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Supply chains act as the pillar of an economy and form a crucial part of every successful business. SCM involves planning and execution.
From large multinational companies to your own household, supply chains exist everywhere. Factors like inflation, trade laws, market trends, global health issues, etc. will impact the functioning of supply chains. Cost reduction, improved efficiency, better supplier relationships, and enhanced customer satisfaction are some of the key benefits of supply chain management.
In the ever-changing global economy, businesses must focus on supply chain resilience and adaptability. The onset of the COVID-19 pandemic made the relevance of supply chain management and its digital transformation evident.
The global supply chain management market size accounted for USD 25.74 billion in 2022 and is projected to hit around USD 72.1 billion by 2032, expected to grow at a CAGR of 10.9% during the period from 2023 to 2032.
The growth of the supply chain industry is creating a growing demand for professionals with supply chain and logistics expertise. From the history of supply chain management (SCM) and its importance to the stages of supply chain and supply chain jobs, here is all you need to know.
What is supply chain management?
Supply chain management (SCM) refers to the optimization of supply chain activities, starting from raw material sourcing to production, logistics, and final delivery to consumers.
According to the Council of Supply Chain Management Professionals (CSCMP), the aim of SCM is to maximize customer value and increase business profitability. SCM ensures the smooth and effective functioning of the supply chain through strategic planning and with the help of specialized software.
Supply chain management encompasses a broad range of activities like sourcing raw materials, storage, planning, inventory management, logistics, finances, information systems, order fulfillment, etc.
The history of supply chain management
The existence of supply chains dates back over 100 years. Supply chains have witnessed tremendous changes over the past few decades.
With the onset of industrialization, supply chains became more sophisticated. The term supply chain management was first noticed in an article published by The Financial Times in the early 1980s.
The advent of personal computers in the 1980s marked a transformative phase in the history of logistics & supply chain. With access to planners, spreadsheets, and mapping software, the management of processes became easier. However, it was during the 1990s the concept of supply chain management gained more recognition.
The SC industry witnessed a further boom with the introduction of ERP (Enterprise Resource Planning) systems in the 1990s. ERP systems consist of software that helps to manage & coordinate different processes within a large business organization. Large companies are increasingly becoming dependent on ERP systems for managing their core business processes like procurement, manufacturing, supply, accounting, risk management, etc. With the popularity of ERP software, logistics & supply chain players started realizing the increasing need for better planning and management.
Unlike the traditional linear model supply chain, modern-day supply chains are complex and outspread with a large number of suppliers and distributors.
Like most of the other business segments, the supply chain industry is also embracing digital transformation for the good. Digital supply chain systems make use of software for handling every activity right from sourcing to manufacturing, storage, information tracking, logistics, and distribution.
Importance of supply chain management
57% of companies believe that supply chain management gives them a competitive edge that enables them to further develop their business.
Supply chain management is now becoming an integral part of businesses as it helps to achieve many business objectives.
By managing the supply chain, companies can reduce excess costs and deliver products faster. SCM helps organizations improve their profit margin, increase efficiency, and deliver more value to customers. SCM systems are highly essential for large organizations with global operations.
Let’s look at the key benefits of supply chain management system in your organization:
- Boosts customer service
- Reduces operating costs
- Increases cash flow
- Improved inventory management
- Ensures legal compliance
- Gain competitive advantage
- Optimize sourcing & procurement process
How supply chain management (SCM) works
Supply chain management (SCM) aims to make supply chains efficient and cost-effective. Managing supply chains makes businesses more agile and resilient to changes.
Artificial Intelligence (AI) integration in supply chain management (SCM)
What are the 5 elements of supply chain management?
The supply chain management process can be classified into the following five stages:
1. Planning
With the help of analytical software and ERP systems, supply chain managers plan the supply chain activities ahead to meet customer demands. Demand forecasting in the supply chain helps to reduce wastage and optimize costs.
2. Sourcing
The next step involves sourcing raw materials and selecting vendors for supplying materials. A supply chain manager oversees all activities related to procurement such as ordering inventory, receiving and invoice generation, and more. Sourcing is a crucial phase in supply chain management as it directly impacts the production process and overall efficiency.
3. Making
This phase involves the manufacturing of goods. The making phase in Supply Chain Management (SCM) encompasses the production schedule, testing, quality control, packaging, storage, and release. Supply chain managers monitor the production process and ensure that everything is performed as planned.
4. Delivering
The delivery process involves mainly logistics and this is the stage that ensures the timely delivery of goods to customers. From reviewing delivery schedules and arranging dispatch to reviewing payments and scheduling delivery, a supply chain manager oversees everything pertaining to product delivery.
5. Returning
SC managers are also responsible for the product returns procedures. Like product delivery, the return process also needs to be well managed to facilitate easy returns of defective or incompatible products.
Supply chain managers should create a network to support returns and address customer needs. It can involve the transport of returned products to the warehouse, scrapping, and managing refunds.
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How to make supply chain management effective
As we already discussed, global supply chains are complex and work in multiple layers. Managing such supply chains can be a huge challenge especially when unfavorable situations arise. There are various obstacles that can impact the successful operation of a supply chain system. Supply chain disruption can result in huge economic losses.
For supply chains to be more effective, managers need to focus on certain parameters and follow some best practices. Larger organizations have started making use of newer technologies like AI and IoT to simplify the SC process and make it more organized.
Advanced Planning and Scheduling (APS) Software has gained more importance in current supply chain operations. APS systems can be easily integrated with ERP software to facilitate effective planning. These systems are beneficial for companies to monitor customer needs and keep up with the changing trends.
Globalization and changing customer demands are forcing companies to come up with innovative SCM strategies. The goal of an efficient supply chain is to optimize the processes to maximize profits and reduce the chances of SC disruption.
Here are some ways to make Supply Chain Management (SCM) effective in your organization:
- Enhance Supply chain visibility
- Plan in advance and be proactive
- Maintain healthy relationships with suppliers & logistics partners
- Improve collaboration with stakeholders and customers
- Identify key SC segments and focus on them
- Use technology to improve processes
- Monitor real-time data to make continuous improvements
Logistics and supply chain management
Although many people use the terms logistics and supply chain management interchangeably, both are different. Logistics is one component of the supply chain and it should not be confused with SCM.
Logistics refers to the storage and movement of goods in and out of the organization. SCM refers to the coordination and management of SC activities starting from raw materials suppliers to the final consumer. Supply Chain Management is a newer concept as compared to the traditional term Logistics.
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Supply chain management jobs
Nearly every industry involves a supply chain and needs managers to oversee the activities. Jobs in supply chain sector are increasing day by day.
According to the U.S. Bureau of Labor Statistics employment of logistic professionals is projected to grow 30% from 2020 to 2030, much faster than the average for all occupations. The median annual wage for logisticians was $77,520 in May 2022.
The overall job outlook of the supply chain and logistics market is positive no matter where you are located.
In the US, supply chain management salary ranged from $56,000 to $185,000 annually.
Of the most commonly reported functional titles, supply chain directors, directors of operations, and supply chain managers earn the highest salaries.
Top career positions for SCM professionals
“Great companies understand the strategic importance of supply chain and want people with supply chain experience in the C-suite.” ~EverythingSupplyChain.com.
- Supply Chain Manager
- Supply/Demand Planner
- New Product Project Manager
- Purchasing Manager
- Warehouse Manager
- Supply Chain Strategist
- Production Planner
- Business Intelligence Analyst
- Business Process Consultant
- Vendor Relations Manager
In Europe, the median supply chain manager salary was reported as €64,868, with the greatest compensation being €95,895.
For managerial positions in SC, employers consider candidates with higher qualifications and in-depth knowledge of business fundamentals. Various supply chain management courses are available nowadays for working professionals. These courses can be completed part-time or online mode while continuing your full-time job.
If you have already completed a bachelor’s degree, you could start by enrolling in an EMBA in Supply Chain and Logistics Management. A postgraduate degree in SCM will offer you the theoretical knowledge and practical experience required to get the best job placements across the globe.
