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What Is Supply Chain Management?

Supply chain management (SCM) is the process of overseeing, coordinating, and improving the flow of resources from suppliers to customers. It involves the management of materials, services, and information along the supply chain from their point of origin to the end consumer. SCM includes activities such as planning, sourcing, production, distribution, and logistics. It is crucial for businesses to have an efficient supply chain in order to maximize profits and ensure customer satisfaction.

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What Does Supply Chain Management Involve?

Supply Chain Management involves optimizing various aspects of a company's operations, such as cost, inventory, quality, and customer service. For example, a company may use SCM to reduce its costs by streamlining the process of ordering materials and services from suppliers and optimizing production processes to produce goods more efficiently.

What are the Supply Chain Management Principles?

The following are the five main principles of Supply Chain Management:

  • Integration: All parties involved in the supply should be working together to ensure a smooth flow of information and resources between them.
  • Information Exchange: Accurate, timely information is essential for effective SCM. This includes sharing data about customer demands, costs, and inventory levels with suppliers.
  • Collaboration: All stakeholders involved in the supply chain must work together to achieve mutual benefits.
  • Flexibility: Companies should remain agile and responsive to customer needs.
  • Cost Efficiency: The primary goal of SCM is to reduce costs by streamlining processes, optimizing inventory levels, and reducing waste throughout the supply chain.

By understanding these principles, companies can optimize their supply chain processes to achieve greater efficiency and cost savings.

What Are the Benefits Of Supply Chain Management?

Some of the benefits of supply chain management include improved customer satisfaction, cost savings, higher inventory accuracy, increased competitiveness, and better supplier relationships. By optimizing the entire supply chain, companies can reduce costs while still meeting customer demands.

Furthermore, SCM helps to ensure that goods and services are delivered quickly and efficiently, thus increasing customer satisfaction. It can be used to maintain high levels of inventory accuracy to ensure that customers receive their orders in a timely manner. Quality assurance is also an essential aspect of SCM, as it helps ensure that products are up to the standards required by customers.

What Tends to Increase the Importance of Supply Chain Management?

The importance of supply chain management tends to increase with the globalization of markets and the increasing complexity of product and service offerings. As companies enter new markets, they need to be able to source materials and services from these locations efficiently.

Additionally, the increasing complexity of customer demands requires companies to be able to respond quickly and effectively. Finally, the rising use of technology in supply management allows for greater efficiency and cost savings. Together, these factors tend to increase the importance of supply chain management for businesses around the world.

What Are the Factors Driving Supply Chain Management?

The factors driving supply chain management are changing customer needs, increasing competition, global sourcing, and new technology. As customer demands become more complex and diverse, companies must develop agile supply chains to meet those demands.

Furthermore, the growth of e-commerce has led to an increase in competition, which has put pressure on companies to optimize their supply chains for cost savings. Similarly, the globalization of sourcing has made it easier for companies to source materials and services from different parts of the world, which has led to increased competition.

Finally, new technologies such as big data and artificial intelligence are helping companies to optimize their supply chains and improve visibility.

What Are The Five Basic Components of Supply Chain Management?

The five basic components of supply chain management include planning, sourcing, production, distribution, and logistics.

  • Planning involves the development of strategies for managing the supply chain to meet customer needs.
  • Sourcing involves selecting suppliers who can provide materials or services at a competitive price.
  • Production is the process of converting raw materials into finished goods.
  • Distribution includes the physical movement of goods from the production site to customers.
  • Logistics refers to managing the overall flow of resources within the supply chain to maximize efficiency and cost-effectiveness.

What Are Some Key Performance Indicators for Supply Chain Management?

Some key performance indicators (KPIs) for supply chain management include fill rate, on-time delivery rate, inventory turns, cost per unit of production, and customer satisfaction.

  • The fill rate measures the percentage of orders that are completed on time and in full.
  • The on-time delivery rate measures the percentage of orders that are shipped on time.
  • Inventory turns measure how often inventories are replenished and how quickly they move through the supply chain.
  • Cost per unit of production measures how much it costs to produce one unit of a product or service.
  • Customer satisfaction measures how satisfied customers are with the product or service they receive.

By monitoring these KPIs, companies can evaluate their supply chain management performance and make improvements as needed.

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Supply Chain Management (SCM) Examples

Some examples of supply chain management include Amazon's rapid delivery service, Walmart's global supply chains, and Apple's vertically integrated supply chain.

  • Amazon's rapid delivery service allows customers to receive their orders within two days or less.
  • Walmart has developed an extensive global supply chain that connects suppliers and stores in multiple countries.
  • Apple has a vertically integrated supply chain, allowing them to control their production process from start to finish.

By leveraging these supply chain management strategies, companies can better serve their customers and remain competitive in today's market.

Supply Chain Management vs. Supply Chains

It is important to note that supply chain management and supply chains are different concepts.

  • Supply chain management involves the planning, sourcing, production, distribution, and logistics activities required to meet customer needs.
  • Supply chains are the physical networks of organizations, people, activities, information, and resources involved in getting products and services from the supplier to the customer.

In short, supply chain management is focused on optimizing how a product is created and delivered, whereas supply chains are the physical infrastructure used to move products and services.

Types of Supply Chain Models

There are three main types of supply chain models: Push-based, Pull-based, and Hybrid.

  • In a push-based model, production is based on forecasted demand, and materials are pushed through the supply chain.
  • In a pull-based model, production is based on actual customer demand, and materials are pulled through the supply chain.
  • A hybrid model combines elements of both push-based and pull-based models to create an efficient supply chain.

Each model has its own advantages and disadvantages, so companies must choose the model that best fits their needs.

What Is Logistics and Supply Chain Management?

Logistics and Supply Chain Management is an umbrella term that encompasses all the activities related to the movement of goods from the point of origin to the end consumer. It involves the integration of various processes such as transportation, warehousing, inventory management, and procurement.

Logistics and SCM also involve risk management, such as anticipating potential delays or disruptions in the supply chain. By managing these activities effectively, companies can reduce costs and increase customer satisfaction.

Why Is Forecasting Important in Supply Chain Management?

Forecasting is essential in supply chain management because it helps companies anticipate customer demand and plan their resources accordingly. By forecasting future demand, companies can ensure they have the right amount of inventory, materials, and labor to meet customer needs.

Accurate forecasting helps companies reduce costs by minimizing overstocking and eliminating excess inventory. Finally, forecasting allows companies to adjust their supply chains quickly in the event of unexpected changes, such as customer demand surges or supplier delays.

What Are Operations and Supply Chain Management?

Operations and Supply Chain Management integrates operations, supply chain, and logistics activities to maximize efficiency and reduce costs. It involves the coordination of activities such as product design, manufacturing, procurement, fulfillment, inventory management, and delivery.

By streamlining these processes, companies can reduce costs and increase customer satisfaction. Additionally, operations and SCM can help companies identify potential cost savings opportunities and improve their competitive advantage.

What Is Strategic Sourcing in Supply Chain Management?

Strategic sourcing in supply chain management is the process of selecting and managing suppliers to maximize value and minimize costs. It involves evaluating potential suppliers based on factors such as price, quality, and delivery times.

By selecting the right suppliers, companies can reduce costs and improve their overall competitiveness. Additionally, strategic sourcing can help companies improve their supply chain visibility and risk management.

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What Is Supply Chain Risk Management?

Supply chain risk management is the process of identifying and mitigating potential risks that can disrupt supply chain operations. It involves evaluating potential threats such as political instability, currency fluctuations, natural disasters, and cyberattacks.

By assessing and managing these risks, companies can minimize disruptions to their supply chain operations and prevent costly delays. Supply chain risk management can also help companies reduce costs and improve their overall efficiency.

What Is Global Supply Chain Management?

Global Supply Chain Management is the process of managing and coordinating global supply chains to maximize efficiency and reduce costs. In a globalized economy, companies need to be able to manage multiple suppliers, vendors, and customers in different locations.

Global SCM involves leveraging advanced technologies such as big data and machine learning to gain visibility into the supply chain and optimize processes. It also involves managing risks such as cross-border tariffs, currency exchange rate fluctuations, and political risks. By managing their global supply chains effectively, companies can reduce costs and increase customer satisfaction.

Ethics and supply-chain management are closely related because companies need to ensure that they are operating in an ethical manner. This includes ensuring that their suppliers meet their standards for labor and environmental practices, as well as adhering to laws and regulations.

Additionally, companies must pay attention to the ethical implications of their actions throughout the supply chain, such as ensuring that suppliers are paid fairly and on time. Finally, companies need to be aware of the potential for unethical behavior within their own supply chain and take steps to mitigate any potential issues.

Which Element of the Marketing Mix Deals With Supply Chain Management?

The element of the marketing mix that deals with supply chain management is Place. Place refers to the distribution of goods and services, which includes both the physical flow of goods and services through the supply chain and the methods used to make them available to customers.

In order to effectively manage Place, companies need to have an efficient and effective supply chain management system in place. This includes sourcing materials and services from suitable suppliers, managing inventory levels, developing distribution channels, and setting pricing strategies.

By effectively managing Place, companies can ensure that their goods and services are available when needed, where needed, and at the right price.

How to Get Into Supply Chain Management?

Getting into supply chain management requires a combination of education, experience, and specialized skills. Generally, most entry-level positions in the field require at least a bachelor's degree in supply chain management, business administration, or a related field.

Additionally, some companies may require certifications such as the Certified Supply Chain Professional (CSCP) or the Certified in Production and Inventory Management (CPIM).

Finally, companies may look for applicants with experience in managing a supply chain, such as experience in logistics, operations management, or purchasing. With the right combination of education, experience, and skills, anyone can get into supply chain management.

What Is a Supply Chain Management Degree?

A supply chain management degree is an academic program that focuses on teaching students the principles of efficient and cost-effective supply chain management. This includes topics such as inventory control, procurement, transportation, and logistics management. Students may also learn about key organizational principles such as quality assurance and ethical business practices.

Students who complete a supply chain management degree are prepared for careers in various areas of organizational leadership, such as operations manager or logistics specialist. These professionals are responsible for overseeing the entire supply chain process to ensure efficiency, cost-effectiveness, and customer satisfaction.

Thus, a supply chain management degree is an excellent way for aspiring professionals to gain the skills and knowledge necessary for success in this field.

What Are the Top Supply Chain Management Degrees?

Universities worldwide offer some of the best top supply chain management degrees. These include but are not limited to the following:

  • University of Michigan: The Stephen M. Ross School of Business offers a Bachelor of Business Administration in Supply Chain Management degree.
  • Penn State University: The Smeal College of Business offers a Master of Science in Supply Chain and Information Systems degree.
  • University of California, Berkeley: The Haas School of Business offers a Master of Supply Chain and Operations Strategy degree.
  • Northwestern University: The Kellogg School of Management offers a Master of Science in Supply Chain Management degree.
  • MIT: The MIT Sloan School of Management offers a Master of Business Administration in Supply Chain Management degree

These top supply chain management degrees prepare students for successful careers in this field by providing them with a well-rounded education. Students learn valuable skills, such as communication and problem-solving, which are essential to the successful management of supply chains. Additionally, these programs provide students with the opportunity to gain real-world experience through internships and other hands-on activities.

By pursuing one of these top supply chain management degrees, students can equip themselves with the knowledge and skills necessary to succeed in this field.

What Can You Do With a Supply Chain Management Degree?

A supply chain management degree prepares students for a wide range of careers. Students may pursue jobs in areas such as operations, logistics, procurement, and purchasing. Additionally, supply chain managers can work in a variety of industries, such as manufacturing, retail, healthcare, and consulting.

Professionals with a supply chain management degree can expect to find jobs in various areas of organizational leadership, such as operations manager or logistics specialist. These professionals are responsible for overseeing the entire supply chain process to ensure efficiency, cost-effectiveness, and customer satisfaction.

By completing a degree in supply chain management, professionals can gain the skills necessary to pursue a career in this field.

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Supply Chain Management Careers

Careers in supply chain management include:

  • Operations Manager
  • Logistics Specialist
  • Procurement Manager
  • Purchasing Manager
  • Supply Chain Analyst
  • Inventory Control Manager
  • Distribution/Warehouse Manager

What Is Supply Chain Management Salary?

Salaries for supply chain management professionals vary depending on the position and location. According to PayScale:

  • Operations managers make a median salary of $70,717 per year.
  • Logistics Specialists earn a median salary of $59,074 per year.
  • Procurement Managers make an average of $72,363 annually.

Salaries for those with a supply chain management degree can also be affected by years of experience and level of education. Those with more experience or higher educational degrees tend to earn a higher salary than those without.

How Can Companies Improve Their Supply Chain Management?

Companies can improve their supply chain management by leveraging technology and data analytics. By using real-time data and analytics, companies can gain visibility into their supply chain and make better decisions. Companies should also focus on engaging with suppliers and customers to build trust and establish long-term relationships.

Finally, companies should also invest in training their supply chain professionals to stay up-to-date with the latest trends in SCM. By taking these steps, companies can improve their supply chain management performance and drive better results.

What Are Supply Chain Management Systems?

Supply chain management systems are software solutions that help companies manage their entire supply chain. These systems provide visibility into the supply chain and help companies make better decisions. These systems also streamline operations and enable companies to automate tasks such as order tracking, inventory management, procurement, and shipping.

Additionally, these systems provide real-time data and analytics that help companies identify inefficiencies and make better decisions.

What Are The Top Supply Chain Management Systems?

The top supply chain management systems include:

  • Google Sheets: A free collaborative online spreadsheet application to manage your supply chain management data.
  • SAP Ariba: A cloud-based procurement and supply chain management system.
  • Oracle Supply Chain Management Cloud: A comprehensive suite of applications for managing global supply chains.
  • IBM Sterling: A cloud-based solution.
  • Kinaxis Rapid Response: A real-time demand and supply planning system.
  • Logility: An integrated supply chain planning and execution system.
  • Coupa Supply Chain Solutions: A cloud-based suite of solutions.
  • Microsoft Dynamics 365 Supply Chain Management: An integrated suite of solutions.

These systems provide companies with the tools and technologies necessary to manage their supply chain. By leveraging these systems, companies can gain visibility into the supply chain and make better decisions.

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Conclusion

Supply chain management is an integral part of any organization's operations. By leveraging technology and data analytics, companies can gain visibility into their supply chain and make better decisions. Companies should also focus on engaging with suppliers and customers to build trust and establish long-term relationships. Supply chain professionals are also in high demand, and salaries vary depending on the position and location. For those looking to pursue a career in SCM, many tools and systems are available to help manage supply chain operations. With the proper education and training, supply chain management professionals can drive better organizational results.

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Hady ElHady
Hady is Content Lead at Layer.

Hady has a passion for tech, marketing, and spreadsheets. Besides his Computer Science degree, he has vast experience in developing, launching, and scaling content marketing processes at SaaS startups.

Originally published Jan 11 2023, Updated Jan 10 2023