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What Is Supply Chain Management?

According to the UN, an estimated 80% of global trade passes through supply chains, so the flow of goods and services is at the heart of most business models. Supply chain performance matters to business success, but for production flows to be efficient and profitable, they need to be managed. 

Your supply chain plays an important role in customer experience, your operational costs, professional reputation and overall profitability. So effective supply chain management can help your business thrive. 

But what is supply chain management exactly and what does it involve? Here’s everything you need to know about what it means to effectively manage your business’s production flow.

What Is Supply Chain Management?

Every supply chain will involve different operational stages, materials and suppliers. Producing and distributing goods or services to buyers is very rarely a one-step process. So supply chain management is the process of managing the entire production flow of your business, from planning your supply chain to sourcing materials, suppliers and contractors, and delivering final products or services. 

Supply chain management should focus on making supply chains as efficient as possible, maximising productivity, reducing operational costs, and increasing ROI. But as well as improving the financial position of your business, supply chain management should also protect your business from supply chain risks such as reputational damage, health and safety risks, compliance risks, and ethical and environmental issues. You need to ensure each stage of your supply chain meets legislative and regulatory requirements and corporate social responsibility strategies should be integrated into supply chains to increase the sustainability of your business.

How Does Supply Chain Management Work? 

While the specifics of supply chain management will vary depending on the business, the basic components of the management process remain the same regardless of the industry. There are five basic components that are essential steps for every supply chain. You should take these steps to ensure production flows are cost-efficient and sustainable:

  • Planning — The planning process involves demand planning using historical data, customer and market research and other forecasting methods. The supply chain also needs to be designed to be efficient, effective and ensure customer demand and expectations are met.
  • Sourcing — You will need to identify resources, materials and the suppliers required throughout the production flow and choose suitable suppliers to provide goods and services. Once suppliers are on board, as a supply chain manager, you will need to monitor and manage your business’s relationships with suppliers. 
  • Manufacturing — If your business requires goods to be manufactured, you will need to oversee the manufacturing process, carry out quality control checks, and plan the delivery of materials and products. 
  • Delivery and Logistics — With products ready to go, or services ready to be completed, you will need to plan how goods or services will be delivered/completed, how customers will make payments, and how you will receive those payments. 
  • Returns — No matter the quality of your goods or services, you need to be prepared to deal with returns. You may need to take back and store or dispose of excess, unwanted or defective products and if you’re providing a service, you may need to offer rework.

Why Is Supply Chain Management Important?

Achieve Supply Chain Compliance 

Supply chains need to adhere to regulations and industry standards, from health and safety regulations to environmental, financial and security regulations. Failure to comply can lead to fines, penalties and reputational damage. But an effective supply chain management strategy will manage compliance risks and take into account all of the standards and regulations governing supply chains, ensuring compliance across your entire production flow.

Boost Customer Satisfaction and Loyalty

Quality control is an important part of supply chain management. Making certain goods and services are delivered on time and to the highest possible standards can help you boost customer satisfaction. 

But with the rise of the conscious consumer, customer satisfaction is about more than the delivery of the final product or service. More customers and clients are taking an interest in how businesses operate. They want to see that businesses are environmentally and socially responsible.

Managing your production flow involves reducing any negative environmental impacts of business operations and ensuring the health, safety and welfare of people involved or affected by your supply chain, including employees, contractors, customers and local communities. So supply chain management can help your business appeal to conscious consumers, increase customer loyalty and boost your brand value.  

Reduce Operational Costs and Increase Profitability

Supply chain management is hugely important for maximising the efficiency and ROI of your supply chain. It involves making production flows as economical as possible by reducing or cutting operational costs and increasing profitability. For example, through proper demand planning and inventory management, you can save time and money on sourcing and stocking physical inventory and minimise losses by reducing waste. 

CHAS can help you manage your supply chain with industry-leading compliance, assessment and verification services.  By signing up for free as a CHAS Client, you’ll gain access to free supply chain management services and receive real-time alerts about the compliance status of your supply chain partners. Or as a contractor, you can join CHAS and demonstrate your compliance with assessment and accreditation schemes such as the Common Assessment Standard. As an accredited CHAS contractor, you’ll prequalify for thousands of projects with CHAS clients looking for suppliers.  

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