What is Supply Chain Management?

Today we’re going to discuss what supply chain management is, the four main links that make up the supply chain, and finally follow along with some real-world examples of how effective supply chain management works.

The global supply chain is all around us, from stocking the shelves in your local grocery store, to securing your weekend getaway hotel, to ordering online from your favorite website. All of these tasks require the global supply chain. What happens when your favorite ice cream isn’t on the store shelf? Your vacation gets canceled because you can’t find a hotel room? Or your favorite website can’t get your products? When this happens, it’s called a breakdown or missing link in the chain of supply.

Understanding Supply Chain Management

Supply chain management means improving the supply process from one end to the other. It includes the design, planning, execution, control, and monitoring of supply chain activities. The role of supply chain professionals is to put on their creative thinking caps and collaborate with various areas within the organization to identify the problem and find a solution that prevents the breakdown from happening again.

The Four Main Links of Supply Chain

There are four main links that make up the supply chain. They are manufacturing and operations, transportation, warehouse and distribution, and purchasing. Let’s take a look at the main links.

Manufacturing is the part of the supply chain where raw materials, ingredients and/or parts are put together through a process to produce a finished product. Jobs within manufacturing include planners, schedulers, and assemblers. They monitor the flow and quality of the products being produced.

Transportation is the movement of products within the chain of supply using different modes of transportation including trucks, air, rail, pipelines, or ships. Jobs within transportation include planners, schedulers, truck drivers, and pilots.

Warehouse and Distribution includes the sites and locations where everything that flows through the supply chain is stored. We refer to all stored items as inventory.

Purchasing is the process of buying everything needed at the best price and quality to produce a final product that meets the customer’s requirements.

A Real-World Supply Chain Example: Cheese

Here is a real life example of how cheese flows through the supply chain. Starting with it in the simplest form and ending with the cheese you can enjoy as an afternoon snack.

Have you ever wondered where cheese comes from and how far it has to travel before it reaches your refrigerator? Well today’s your lucky day! We are going to discuss the entire process.

Let’s start with the suppliers who provide all of the raw materials. It all starts with the dairy farmers who raise and milk the cows. They provide the milk. The purchasing team coordinates purchases from these and other suppliers who provide additional cheesemaking ingredients like milk, salt, rennet, and whey.

It’s important to move the milk and the other ingredients with the most appropriate type of transportation, whether that’s a semi-truck, a rail car, a boat, or an airplane. Picking the right transportation method is an important decision that’s made by transportation coordinators. They must make sure the ingredients arrive on time to meet the scheduled delivery date.

Once all of the ingredients arrive at the manufacturing facility, a production team within the manufacturing facility goes to work making the finished goods product that we call: cheese. Until we know who the customer is, the cheese needs to be stored in a cool, dry place in the warehouse. Depending on where the cheese is stored within the warehouse, a truck or forklift may need to move the cheese to the appropriate location.

Once a customer places an order, the warehouse employees locate the correct variety and they place it on another truck that delivers the cheese to the customer. The cheese is now in your refrigerator and ready for your next snack. Getting the cheese to your refrigerator can be a complicated process, which is why effective and productive supply chain management is so important.

Roles Supporting the Supply Chain

While the products are flowing through the chain of supply, many other cross functional business departments are responsible for supporting the smooth flow within the chain of supply. Let’s hear how some of their roles support the supply chain.

Customer Service

I’m the voice in the link between the external customer and the manufacturing facility. I ensure that the customer’s wants and needs are being successfully met and that the products are delivered on time. I participate in daily calls with the customer, sales representatives, production, purchasing, and distribution just to name a few; to ensure that we’re providing exceptional customer service.

Marketing

I provide the supply chain professionals with important information regarding consumer trends, promotional opportunities, pricing, and placement of products and services into the marketplace. I play a valuable role during weekly capacity planning meetings to ensure that we’re meeting our customer’s needs at the right times and at the right places.

Engineering

I help select appropriate suppliers by providing the technical specifications and reviewing their products to ensure they conform to specifications. I also design the processes and equipment used to make the cheese, the packaging that facilitates the transportation and storage of the cheese, and the grocery store displays showcasing the cheese.

Finance

I ensure that we’re managing our inventories to the best of our ability. At the end of the day our business needs to make a profit because that’s what allows us to keep our doors open for many years to come.

IT

As an information technology professional I automate processes, link businesses together using software, and develop reporting systems to manage data. All of these functions work together to positively impact my organization’s bottom line.

Quality

My job is to ensure that we have well-defined processes and inspections in place for all incoming raw materials and outgoing finished goods. If our customers aren’t happy, I need to identify the root cause of the problem and find out what needs to be done to improve our product and make the customers happy.

As you can see from this example, the supply chain is all around you and is part of your everyday life. As a supply chain professional, you get to work with many people from different areas of the business to solve problems, analyze data, improve processes, and build strong relationships that support the chain of supply.