BASICS OF SUPPLY CHAIN MANAGEMENT

Introduction
A supply chain is the entire process of distribution from acquiring the raw materials needed to
make products to delivering final goods to consumers. Companies with high-performing supply
chains recognize that it starts with a customer-centered mindset. All activities must be managed
with the end goal of creating and delivering value to the target consumer.

Supply chain management (SCM) is the process of managing all the members and activities
from the procurement and transformation of raw materials into finished goods through their
distribution to targeted consumers.

Supply chain management (SCM) is about planning, executing, and controlling the operations
of the supply chain as a whole. It includes managing the movement and storage of raw materials,
work-in-progress products, and finished goods from origin to consumption.
SCM also involves coordinating and integrating these activities with the activities of other
departments within the organisation, such as accounting, finance, marketing, and manufacturing.
In addition, SCM requires close cooperation and coordination with suppliers and outside service
providers.
The goal of SCM is to optimise the overall performance of the supply chain by reducing costs and
enhancing service levels and customer satisfaction. Many organisations view SCM as a strategic
differentiator that can give them a competitive advantage in the marketplace
Supply chain management is a centralised process of managing the flow of goods and services. It
includes the complete process of transforming raw materials into final products and delivering
them. The process comprises streamlining all business and manufacturing activities to maximise
efficiency and cost-effectiveness.
Supply chain management (SCM) oversees how goods and services evolve from idea creation
and raw materials into a finished consumer product. It includes moving and storing the materials
used to produce goods, storing the finished products until they sell and tracking where sold
products go so that you can use that information to drive future sales.
The process of SCM involves every aspect of business operations, including logistics, purchasing
and information technology. It integrates materials, finances, suppliers, manufacturing facilities,
wholesalers, retailers and consumers into a seamless system.
Supply chain management coordinates all business activities that are necessary to produce and
deliver goods and services to customers. It includes the handling of the entire flow of goods and
services, starting from procuring the raw components from vendors to delivering the final product
to customers.
Supply Chain Management is end to end management of supply chain activities and processes.
Supply chain management activities involve procurement of materials, planning of finished goods
and Raw and Packaging materials, production and storage of goods and movement and delivery
of Finished goods to the customers and consumers. Supply chain extends from supplier to
manufacturer to distributor to retailer and ends at consumer. Consumer is also essential part of
supply chain.
The Council of Logistics Management defines supply chain management (SCM) as "the process
of planning, implementing and controlling the efficient, cost effective flow and storage of raw
materials, finished goods and related information from the point-of-origin to the point-of-
consumption for the purpose of conforming to customer requirements'.

Bernard J. (Bud) LaLonde, defines supply-chain management as follows: "The delivery of

enhanced customer and economic value through synchronised management of the flow of physical
goods and associated information from sourcing to consumption."

Historical Perspective
Supply chain management, as we understand it today, represents the confluence of at least three
main streams of knowledge and practical experience of the business world spanning almost 60
years. The fusion of these streams into one powerful movement-supply chain management- that is
sweeping across the present day industrial world has
been brought about by intense competition characteristics of the contemporary markets. These
streams include business process and managerial practices, which have evolved somewhat
unconnectedly in the field of operations management, industrial engineering and physical
distribution. In the course of their development, these processes and practices have absorbed
several allied and subsidiary functions as well as activities and adopted some successful business
innovations. These three principal streams are:

 Sourcing, procurement and supply management

 Materials management
 Logistics and distribution.

Sourcing, Procurement and Supply Management: These functions arose in the area of
purchasing which came to occupy a predominant position in businesses because of the impact
these had on cash flow and contribution they made to the company profitability. In the context of
supply chain management, these processes fall under sourcing, supply side management, inbound
logistics, and supplier relationship management together with materials, information and cash
flows connected therewith.

Materials Management: Classic material management included the functions of forecasting,

inventory management, stores management, warehousing, stock keeping and scheduling toll it
came to include production planning and production control to evolve into extended material
management. In relation to supply chain management, it may be regarded as the management of
flow of materials into, through and out of an enterprise, adding in the process, value for the
customers both internal and external to the organisation.

Logistics and Distribution: Derived from military parlance, wherein it covered all functions
related to movement and maintenance of armies, the logistics function in its business application
came to be recognised as time and space related placement of goods to provide improved customer
services. According to council of logistics management, it is that part of the supply chain
management process that plans, implement and controls the efficient, effective, forward and
reverse flow and storage of goods, services and related information between the point of origin
and the point of consumption in order to meet customer's requirements. In the

context of supply chain management, logistics would fall at both ends, that is, inbound logistics
and outbound logistics.
Functions of Supply Chain Management
Supply chain management has five major functions. These include purchasing, operations,
logistics, resource management, and information workflow. Good supply chains perform these
functions in a way that meets the wants and needs of final consumers efficiently.

Figure 17.13 The Five Major Functions of Supply Chain Management (attribution: Copyright
Rice University, OpenStax, under CC BY 4.0 license)

1. Purchasing
Purchasing is the process of buying materials needed to manufacture products. These materials
are purchased from suppliers, who must be able to deliver them in accordance with the
manufacturer’s timeline. Therefore, the manufacturer’s companies and suppliers must
communicate and coordinate to ensure timely delivery of materials. The process includes tasks
including creating and analysing product needs, handling requisitions, requesting bids, evaluating
bids, awarding supply contracts, inspecting acquired goods, and managing storage and release.

The timely arrival of materials is necessary to ensure that all order fulfillment occurs as required
by customers. It is necessary to ensure no disruption in supply of materials to have continuous
production without any interruption. Purchasing in excess can result in unnecessary blocking of
money and usage of space. Hence, purchase managers must have up-to-date information about
orders and what materials will be needed to execute them on time.

For example, Ben & Jerry’s ice cream flavor Mint Chocolate Chance has cream, skim milk, sugar,
egg yolks, white flour, cocoa powder, soybean oil, and vanilla extract, among other ingredients.
Ben and Jerry’s must forecast the number of ingredients it needs to purchase so that these amounts
match the demand for this particular flavor. The company, in turn, assesses things like total number
of orders and inventory turnover for its Mint Chocolate Chance product to help forecast the
quantity of ingredients it will need from suppliers.

2. Operations
Operations is everything a company does on a day-to-day basis to run a company. Before a
company purchases the needed materials and begins production, it must forecast demand for its
products. Forecasting involves anticipating or projecting how many units of a product will be sold
during a given period. Accurate forecasting must align with inventory management and production
schedules to ensure that the company is operationally positioned to manufacture the right amount
of product to meet the needs of consumers.

Before giving a raw material purchase order, the organization must anticipate the possible demand
for a product and the number of units it needs to produce. If the demand is over anticipated, then
it could result in excess inventory cost. If the demand is under anticipated, the establishment
wouldn’t be able to meet customer demand, thereby leading to revenue loss. So, the operation is a
critical function of supply chain department.

Operation managers are responsible for planning production in relation to demand. These officials
will have to arrange for raw materials and ensure that manufacturing will be done on time to ensure
prompt delivery of goods to customers. They must make sure that all machines function properly
without failure to complete production of goods on time. They must also ensure that all other items
like packaging materials, labels, and stickers are kept ready for those products that need to be
delivered to customers.

3. Logistics
Logistics is a function that involves the coordination of all supply chain activities, such as
warehousing, inventory management, and transportation. Companies along the supply chain must
communicate effectively to ensure that products reach consumers in a timely and efficient way in
the precise form that the consumer expects. For example, when consumers eat McDonald’s French
fries, they expect the fries to taste a certain way. Suppliers and intermediaries along the channel
work together to ensure that those expectations are met. Good logistical management helps ensure
this.

This is a supply chain management function that requires immense coordination. The
manufacturing of products has commenced. It needs space for storage until it is shipped for
delivery. There is a need for making local warehouse arrangements. Let’s say; the products are to
be delivered outside the city, state, or country limits. This brings transportation into the loop. There
will also be a need for outstation warehouses. Logistics ensures that products reach the end-point
delivery without any glitches.

Arranging for transport for goods is not an easy job. If this includes shipping to other countries, it
is essential to ensure that staff members do all documentation properly. Incorrect sets of papers
could cause problems at both exporting and importing ports. This can cause delays in goods
reaching customers. The logistics manager must be familiar with formalities that establishments
must follow when sending goods to different countries. Various countries also have testing
requirements for different products.

Even in local transport of material, there can be unexpected problems. Vehicles can get delayed
due to mechanical issues. Supply chain managers must be able to arrange for an alternative
conveyance immediately. Weather and road conditions can delay materials. The person must know
such information and make arrangements to ensure goods arrive on time. There must be a proper
tracking mechanism in place to inform customers about their order status.

4. Resource Management
Resource management is the planning, organizing, and controlling of resources. Resources include
the labor, the raw materials, and the technology that are required to move products from their raw
material phase to finished goods available for consumption. Effective supply chain management
requires the right allocation of these resources to the right supply chain activities to optimize the
entire system.

All firms need raw materials, technology, time, and labor. However, all the processes need to be
efficient and effective. This phase is taken care of by the resource management function team. It
decides the allocation of resources in the right activity at the right time to optimize the production
at reduced costs. A major duty here is to properly allocate people for various jobs to ensure that
all work is done on time. The workforce is essential in moving goods and ensuring the proper
execution of orders.

Managing resources is challenging in factories where they use the same machines for making
different products. Resource managers must know how many orders in each item are to be executed
to allocate machines for each of them. Various other pieces of machinery are needed to complete
finished goods manufacturing. Arrangement of devices for packing and labeling of goods are also
part of supply chain department functions.

Time is another constraint when there are large volumes of orders to be executed. These
professionals must see whether a single shift is enough to complete a job or more shifts will need
to be included. Hence, they must make sure people are available to work more hours. These
managers must also calculate the cost involved in using more resources for increasing production
and ensure it doesn’t affect profitability.

5. Information Workflow
Information workflow is a supply chain management function that relates to what and how
information moves between members of the supply chain. If information doesn’t flow effectively
or communication is poor, the entire process can suffer as a result of disruptions, delays, and
mistakes. Employing a systematic approach to sharing information across the supply chain ensures
that the right companies have the right data to make the right decisions at the right time.

Information sharing and distribution is what keeps all other functions of supply chain management
on track. If the information workflow and communication are lacking, it could break apart the
entire chain and lead to mismanagement. Data must flow in both directions as far as logistics are
concerned. Regular exchange of information must also happen between external and internal
entities in this process.

Information from downstream will include details of orders in hand and market trends. These
details are crucial for ensuring that enough quantities of raw materials are made available.
Knowing market trends from retailers and distributors will help to formulate sales forecasts.
Without such predictions, companies cannot plan for production. Organizations must also arrange
for finance if there is a need to increase production because of a sudden demand increase.

Arranging for raw materials is among the essential roles of supply chain management. To perform
this perfectly, the official in charge must have accurate information about the availability of
various materials. Advance information of any shortage will help them purchase excess and ensure
production continues smoothly. News about price increases is also essential to correct finished
goods prices or look for other economic sources for such items.

Goals/Importance of Supply Chain Management

1. Order Fulfillment
Without selling goods, a company cannot earn revenue. For this, it is essential for orders from
customers to be fulfilled efficiently and as per customer requirements. All entities of the supply
chain work together to ensure that goods are available as required. This will result in the execution
of all orders. Streamlining order processing and avoiding duplicate work by using efficient software
will increase order processing speeds. This is a vital role of supply chain management that has
multiple benefits.

2. Supply Demand Matching

Order fulfillment is possible only if there are goods. It is the job of Supply Chain managers to ensure
that raw materials are available for producing items. There must be good coordination between the
sales team and purchase team to ensure that there is never a shortage of products that have a high
market demand at a particular time. A free flow of information provides this. Predicting market
trends using analytics is an excellent way of making sure that enough materials are available to
meet customer needs.

3. Reducing Waste
Waste reduction is an essential function of supply chain management through various methods.
Avoiding excess stocking of raw materials is a way to prevent wastage. Many products cannot be
used after a period, and this means they must be discarded. Having a clear idea about customer
demand helps to maintain an optimum quantity of raw and finished goods. SC managers are
constantly in touch with marketing teams to know demand trends and alter product stocks
accordingly. Having a proper inventory management system is vital for achieving optimum stock
levels.

4. Improving Delivery Speeds

With the proliferation of e-commerce sites, delivery speed is becoming a significant criterion for
customers. Companies are vying with each other to offer a faster supply of goods than competitors.
This has put immense pressure on supply chain managers. They must find ways to speed up the
movement of goods. Finding warehouses closer to customers is a way to do it. Ensuring the timely
availability of delivery vehicles can also help in reaching goods to consumers on time.
Collaboration with transporters ensures an uninterrupted supply of vehicles.

5. Ensuring Real-Time Information

Information is crucial for any operation. This is especially true with this department, where various
persons are overseeing different but connected operations. Any delay in one could affect everything
down the line. This is why up-to-date status is made available for everyone. Customers today
demand to know the status of their orders. Information about raw material needs must also reach
purchasing teams on time. It is a crucial Supply Chain Management (SCM) function to ensure that
an adequate tracking mechanism is in place for real-time information for everyone.

6. Cost Reduction
When markets are highly competitive, and margins are thin, companies must constantly try to
reduce costs. Various costs come under supply chain management. Raw material prices, storage
costs, transport rates, etc., must be kept at the lowest possible levels. For this purpose, SC managers
must regularly lookout for new partners who can offer better rates. Good interaction with existing
suppliers, transporters, and warehouse owners will also help to bring down costs. Managers in
charge of various functions must always look for ways to bring more economy in this process.

7. Facing Disruptions
Various disruptions can occur in a company’s operations. A machine failure can stop production
temporarily. The non-availability of raw materials can affect finished goods stocks. A sudden surge
in prices of raw materials can affect profitability. Weather conditions can affect goods movement
resulting in delayed deliveries. All these are related to supply chain management functions, and
they must be ready to deal with these and ensure that neither the company nor its customers suffer
due to these factors. Risk management methods are used to assess and mitigate these threats.

8. Improving Customer Experience

Severe competition has made all companies look at customer experience more seriously. No firm
can afford to lose even one customer because the cost of acquiring new customers is very high.
Supply Chain Management (SCM) plays a vital role in giving customers a better purchase
experience. Exploring various ways to reach goods to a buyer within a short time has become a
priority for this department. These professionals also try to reduce delivery expenses as much as
possible to sell products at competitive prices. Another way to please customers is to give them
real-time information on order execution.

9. Increasing Revenue & Profitability

The supply chain is a function that has a broader scope for cost reduction as they are involved in
purchasing, storage, and delivery of goods. Maintaining a good relationship with vendors can help
reduce raw materials costs. Having multiple suppliers ensures to get the best prices. Optimizing
storage space helps to reduce warehousing costs. It is possible to reduce delivery expenses by
choosing suitable transporting and distributing partners. Reduced costs and increased sales help
improve revenue and profitability.
Though it is a function that provides many benefits to establishments, it is not a job that can be done
easily. Modern supply chain managers face a lot of challenges in their jobs that they must cope up
with to ensure successful company operations.

Challenges Faced in Supply Chain Management

1. Increasing Costs
Throughout an organizations’ activities, there is an increase in cost for almost everything. High fuel
prices are driving transportation costs through the roof. Subsequently there is a hike in all raw
material prices. Labor costs are increasing as there is a shortage of skilled people to fill positions in
supply chain departments. Expenses for storing materials are also going up as space becomes a rare
commodity, especially in cities. SC managers must look at all possible ways to reduce costs.

2. Multiple Supply Channels

With e-commerce companies becoming a more common method of purchase for many people, there
is high complexity in delivery channels. Working for such organizations will require a good
understanding of their system and meet delivery promises. These firms must deliver goods directly
to customers. There are also retailers and wholesalers who need to be supplied from nearby storage
locations to ensure low inventory for them. In addition to this, there are those who want drop
shipments that will need fast international services. The role of supply chain department has become
highly complex.

3. Rising Consumer Demands

As competition prompts e-commerce companies to offer close to impossible delivery times at very
low prices, it is the supply chain department that suffers. Because of a number of choices, customers
are demanding better service. They want fast delivery, low price, and excellent quality. As the
logistics department is in charge of purchase and delivery, all these responsibilities fall on their
shoulders. Performing their duties successfully is highly challenging for these professionals.

4. High Risks
With pressure increasing on supply chain managers, there is a likelihood of mistakes happening that
can lead to highly adverse situations. With suppliers and customers spread across various countries,
there are a lot of things that must be considered and enough measures taken to avoid loss of goods.
The non-availability of real-time information can be worrisome. Logistics managers are unable to
input accurate data because of this. Compliance and regulation issues add to these problems. SC
managers must ensure that all risks are accounted for, and steps are taken to avoid them.
5. Delays and Backlogs
Various other factors are creating delays and backlogs in supplies. New regulations in certain
countries mean additional tariffs and more time to process documents at ports. Suppliers from other
nations with lesser rules will make use of this situation. An increase in international sourcing is
creating congestion at most ports resulting in delays. There are problems with local supplies due to
the non-availability of transport. Managers in this department must be on their toes always to ensure
that they can overcome these problems and ensure prompt deliveries.
It is quite evident that the role of supply chain management in an organization is very important,
and companies are preferring to have experts in this science to manage this department. It is not
enough that one has a qualification in Supply Chain Management (SCM). There are
certain skills that supply chain managers must possess to do their work successfully.

Skills Needed for A Supply Chain Manager

1. Data Analysis Skills

SC managers must possess data analysis skills to gain valuable insights. It helps them make smarter
decisions on various matters. This process includes a lot of factors that cannot be predicted
correctly. Looking through past data can help to make better forecasts. This will allow these
professionals to perform better and avoid unpleasant surprises. They can be better prepared to face
any situation and ensure that the process goes on without any disruptions.

2. Inventory Maintenance Skills

This is a very critical skill that is necessary for every logistics manager. Too much inventory can
cost a company a lot of money by way of slow-moving stocks and storage space. An inadequate
level of stocks can lead to the non-fulfillment of orders. This can lead to losing customers. One
needs to balance between the two. Looking at past data can help a lot in predicting the requirement
of goods at different times of the year.

3. Flexibility
As we can see, a lot of people both within and outside the company are involved in completing the
functions of Supply Chain Management (SCM). This requires a manager to be flexible because
there can be people from different backgrounds and cultures. Being amicable will help to get things
done in a smoother way. In times of crisis, such an attitude will enable one to get support from
every person involved in this process.

4. Understand Regulations
The supply of materials can be across borders inside a country or even outside it. It is essential that
a logistics manager knows what documents must be prepared to ensure that there are no legal issues
when transporting goods. The person must also be aware of rules with regard to stocking goods.
They must follow the rules with regard to the safety of goods and personnel inside a warehouse.
Such familiarity with rules will ensure that work gets done smoothly.

5. Planning
Good planning is key to completing a job well. This is true for any profession. But it is a critical
activity in supply chain management. Market trends decide what must be produced and how much
quantity will be required. This means that once there is a sales forecast, these professionals must
plan everything from raw material procurement to delivery of goods to a customer. This will include
production planning, arranging space, and organizing transport for delivery. All these items must
be planned well if the job must be completed successfully.

6. Leadership
The function of Supply Chain Management (SCM) spans various departments. This means that the
supply chain manager has to get work done by a diverse group of people. This will need excellent
leadership qualities because only by inspiring others can work be completed successfully.
Exhibiting such characteristics will help earn the loyalty of staff members. They will willingly go
beyond their call of duty to ensure that work doesn’t suffer in any way. Showing leadership qualities
also helps to inspire others to acquire such skills.

7. Business Acumen
Though they are not directly involved in selling or earning revenues, these managers’ actions can
have a direct bearing on the sales and profits of an organization. This makes it necessary for them
to know about the business that their company is involved in. These professionals must know what
impact their work has on their firm’s profits. This will help them make changes that can improve
efficiency and reduce costs. It is also necessary that they know what is happening in the industry
that their establishment operates in.

8. Decision Making
This is a skill needed for all leaders. But it is especially crucial for those in charge of the activities
of supply chain management. This is because there are various tough situations that will require
immediate decision-making. Their decision can affect organizational profitability, reputation, and
customer satisfaction. This means they must know what decision will be most beneficial for their
company. These decisions must also be taken quickly before any adverse results occur.

9. Accountability
This is very difficult to maintain when an SC manager must depend on many people inside and
outside the firm for successful functioning. It is easy to blame any of these entities. But what one
must cultivate is to be accountable for every outcome, whether it is good or bad. This will improve
their team members’ trust in them. Companies will also have confidence in such managers who will
take responsibility for their department’s actions.

10. Adapt to Changes

Changes are most often seen in logistics departments. There are various external factors that can
affect their functioning. A machine failure at a supplier’s factory could badly disrupt production.
The supply chain function includes ensuring a regular supply of raw materials as purchases come
under their purview. The person must be able to arrange for an alternate supply of goods. They also
have to make other arrangements if some factors are affecting the movement of goods to customers.
They must quickly be able to adapt to changes.

11. Interpersonal Skills

An SC manager must deal with people from different backgrounds. They have to get work done by
workers at lower levels. These professionals will also have to interact with top bosses and get their
needs fulfilled for smooth operations. It is also in their line of work to regularly keep in touch with
outside agencies like suppliers, distributors, transporters, and shipping agents. Good interpersonal
skills help them get their work done efficiently from all these people while maintaining cordial
relationships.
12. Communication
A logistics manager has to convey various instructions, requests, suggestions, and information to
different sets of people. These must be done orally and in writing. As they are done to people with
different educational and social backgrounds, it is necessary to convey messages in different styles
and standards. This is why these persons must be highly skilled in communication. Others must
understand them clearly so that precise action is taken and the desired outcome achieved.
In addition to these skills, it will be advantageous for logistics managers to use tools and techniques
that will make their lives a lot easier. Let us see some of these tools that assist these busy
professionals.

Supply Chain Management Process

The supply chain management process covers supply chain planning, procurement/supplier
management, manufacturing, inventory/warehouse management, shipping/delivery, and return.

1. Supply Chain Planning

Supply chain planning involves the process of coordinating and managing the flow of goods,
services, and information from the raw materials stage to the end customer. There are several key
aspects of planning that are involved in supply chain management, including:
 Demand forecasting: Demand forecasting involves predicting future demand for goods
and services. This is an important aspect of supply chain planning as it helps companies
ensure that they have the right amount of inventory on hand to meet customer demand.
 Capacity planning: Capacity planning involves determining the amount of production
capacity that is needed to meet demand. This includes determining the number of units that
can be produced, as well as the amount of raw materials and other resources that are
required.
 Inventory management: Inventory management involves planning and coordinating the
flow of inventory through the supply chain. This includes determining the right level of
inventory to maintain, as well as managing the movement and storage of inventory.
 Sourcing and procurement: Sourcing and procurement involves identifying and
managing the flow of goods and services from suppliers. This includes identifying and
 evaluating potential suppliers, negotiating terms and conditions, and managing the
purchasing process.
 Transportation and logistics: Transportation and logistics involve coordinating the
movement of goods and materials from one location to another. This includes determining
the most efficient and cost-effective modes of transportation, as well as managing the
loading and unloading of goods.
Overall, supply chain planning involves coordinating and managing a wide range of activities to
ensure that goods and materials are delivered to the end customer in a timely and cost-effective
manner.

2. Procurement
Procurement is the process of purchasing goods and services from suppliers and is a critical part
of supply chain management. There are several key aspects of procurement that are involved in
supply chain management, including:
 Supplier selection: Supplier selection involves identifying and evaluating potential
suppliers in order to choose the most suitable ones for a company’s needs. This may involve
considering factors such as cost, quality, delivery schedules, and the supplier’s reputation.
 Negotiation: Negotiation involves the process of establishing the terms and conditions of
a procurement agreement, including the price, delivery schedules, and payment terms. This
may involve negotiating with suppliers to secure the best possible terms for the company.
 Order placement: Order placement involves issuing a purchase order to a supplier and
specifying the goods or services that are being purchased. This may include providing
detailed specifications and delivery schedules.
 Receiving and inspection: Receiving and inspection involves receiving the goods or
services that have been purchased and verifying that they meet the company’s quality and
quantity requirements. This may include conducting inspections to ensure that the goods
or services meet the specified standards.
 Payment: Payment involves settling the financial obligations associated with a
procurement agreement, including paying the supplier for the goods or services that have
been received.
Overall, procurement is a critical aspect of supply chain management that involves coordinating
and managing the purchasing of goods and services from suppliers.

3. Manufacturing
Manufacturing is the process of transforming raw materials into finished goods, and it is a critical
part of the supply chain. There are several key aspects of manufacturing that are involved in supply
chain management, including:
 Production planning: Production planning involves determining the most efficient and
cost-effective way to produce goods. This includes identifying the production processes
and resources that are needed, as well as determining the production schedule and
quantities.
 Production management: Production management involves coordinating and overseeing
the production process to ensure that it is running smoothly and efficiently. This may
include managing the flow of materials, monitoring production equipment, and ensuring
that production meets quality standards.
 Quality control: Quality control involves ensuring that finished goods meet the specified
quality standards. This may involve implementing quality control measures such as
inspections and testing to ensure that the goods meet the required specifications.
 Inventory management: Inventory management involves coordinating the flow of
inventory through the production process. This includes determining the right level of
inventory to maintain, as well as managing the movement and storage of inventory.
 Distribution: Distribution involves getting finished goods to the end customer. This may
involve using various distribution channels, such as retail stores, e-commerce platforms, or
wholesalers.
Overall, manufacturing is a critical part of the supply chain that involves transforming raw
materials into finished goods and ensuring that they meet the required quality standards before
being distributed to the end customer.

4. Inventory and Warehouse Management

Inventory and warehouse management are critical aspects of supply chain management that
involve coordinating the flow of goods and materials through the supply chain. Some key aspects
of inventory and warehouse management include:
 Inventory planning: Inventory planning involves determining the right level of inventory
to maintain in order to meet customer demand while minimizing costs. This may involve
considering factors such as lead times, demand patterns, and safety stock levels.
 Inventory control: Inventory control involves managing the flow of inventory through the
supply chain. This includes activities such as receiving, storing, and distributing goods, as
well as monitoring inventory levels and ensuring that they are accurate.
 Warehouse design and layout: Warehouse design and layout involves determining the
most efficient and cost-effective way to organize and store inventory in a warehouse. This
may include considering factors such as the type of goods being stored, the equipment and
resources that are needed, and the flow of goods through the warehouse.
 Material handling: Material handling involves the movement and storage of goods within
a warehouse. This may include the use of equipment such as forklifts and conveyor belts
to move and store goods, as well as manual handling techniques.
 Order fulfillment: Order fulfillment involves processing and completing orders for
customers. This may include activities such as picking and packing orders, as well as
managing the shipping and delivery process.
Overall, inventory and warehouse management are critical aspects of supply chain management
that involve coordinating the flow of goods and materials through the supply chain.

5. Transportation, Shipping and delivery.

Shipping and delivery are critical aspects of supply chain management that involve coordinating
the movement of goods and materials from one location to another. Some key aspects of shipping
and delivery include:
 Transportation planning: Transportation planning involves determining the most efficient and
cost-effective way to transport goods and materials. This may include considering factors such as
the type of goods being transported, the distance they need to travel, and the available modes of
transportation.
  Route optimization: Route optimization involves determining the most efficient route for
transporting goods and materials. This may involve considering factors such as distance, traffic,
and delivery schedules.
 Freight management: Freight management involves coordinating the movement of goods and
materials by air, land, or sea. This may include managing the loading and unloading of goods, as
well as tracking the movement of goods in real-time.
 Distribution: Distribution involves getting goods and materials to the end customer. This may
involve using various distribution channels, such as retail stores, e-commerce platforms, or
wholesalers.
 Customer service: Customer service involves providing assistance and support to customers
during the delivery process. This may include activities such as tracking orders, providing updates
on delivery schedules, and handling any issues or concerns that may arise.
Overall, shipping and delivery are critical aspects of supply chain management that involve
coordinating the movement of goods and materials from one location to another and ensuring that
they are delivered to the end customer in a timely and cost-effective manner.

6. Return
Returns are a common part of the supply chain process, and there are several key aspects of
managing returns that are involved in supply chain management. These include:
 Return policy: A return policy is a set of guidelines that outlines the terms and conditions under
which a customer can return a product. This may include information such as the time frame in
which a return can be made, the types of products that are eligible for return, and the process for
obtaining a refund or replacement.
 Return handling: Return handling involves managing the process of receiving and processing
returned products. This may include activities such as inspecting the returned product, determining
whether it is eligible for a refund or replacement, and issuing a refund or processing a replacement.
 Reverse logistics: Reverse logistics involves coordinating the movement of returned products from
the customer back to the company or a third-party provider. This may involve using various
transportation modes and coordinating the handling and storage of the returned product.
 Refunds and credits: Refunds and credits involve issuing a refund or credit to the customer for
the returned product. This may involve processing the refund or credit through the company’s
payment system or issuing a physical check or credit card credit.
  Product disposal: Product disposal involves disposing of returned products that are no longer
suitable for sale or that cannot be resold. This may include activities such as recycling or donating
the product, or disposing of it in an environmentally responsible manner.
Overall, managing returns is a critical aspect of supply chain management that involves
coordinating the movement of returned products and ensuring that they are handled in a timely and
cost-effective manner.

SCM Challenges for Modern Businesses

Obviously, with so many moving parts, processes that must work cohesively, relationships to
manage, and other factors to consider, supply chain management is an incredibly complex
function. Here’s a look at some of the main challenges facing today’s organizations in supply chain
management.

1. Globalization

Globalization is a broad concept, but within it are several specific challenges in supply chain
management. For instance, supply chain management is focused on reducing costs throughout the
supply chain, and globalization often leads companies to move manufacturing operations to
regions or countries where labor is more affordable, taxes are lower, or raw materials or
transportation are more cost-effective.
Often, companies outsource production to several countries for various parts, components, or
production phases. The procurement network necessarily expands as a result, which complicates
the supply chain, leaving companies to navigate the manufacturing, storage, and logistics across
borders.
All of this must occur while maintaining acceptable delivery speed for end customers and
maintaining real-time visibility into the complete production cycle.

2. Competition
Another challenge in supply chain management is increased competition. As barriers to entry in
many industries are lower today than they were many years ago, it’s easier for new companies to
emerge and threaten the market share of established organizations – often because they embrace
innovations that enable them to produce the same end result with greater efficiency or at a lower
cost.
This challenge isn’t new; in fact, a 2010 survey conducted by McKinsey & Company found that
increasing pressure from global competition was a key challenge for many survey respondents,
both over the three years prior and looking ahead to the following five years (through 2015).
Competition is always a concern for supply chain organizations. However, companies started
looking at competition through a new lens: leveraging effective supply chain management as a
means to gaining a competitive advantage.
How can you leverage your supply chain as a competitive advantage? By looking at your supply
chain as a value chain and focusing on six core principles, according to Supply & Demand Chain
Executive:
1. Focus on collaboration rather than competition.
2. Don’t lose sight of the big-picture goal.
3. Recognize the complex, but manage the simple.
4. Treat the central issue rather than the symptom.
5. Focus on cost drivers and business impacts.
6. Pursue ideas worth pursuing with your best effort.

3. Technology Adoption and Other Resource Utilization

Getting distracted by shiny new objects is a prominent challenge across many industries, and
supply chain management is no exception. Implementing technology should have a clear benefit
to the supply chain, from simplifying processes to improving visibility, enhancing efficiency, or
lowering costs. Technology investments should produce ROI, whether directly or indirectly.
That said, the temptation to jump on the latest technology bandwagon is real – often grounded in
FOMO (fear of missing out). What happens if your competition invests in the latest technology
advancement and you opted out, leaving them with a competitive advantage?
There are many technologies worth investing in to improve supply chain management processes;
in fact, certain technologies are essential for effective operations. But investing in the wrong
technology can have negative impacts that affect every facet of the organization, down to the
bottom line. That’s why investments in technology and other resources require careful
consideration and cost-benefit analysis.
 4. Security
As supply chain organizations increasingly rely on technology, such as cloud computing, to
streamline business processes, security vulnerabilities become an ever-more prominent threat.
Security risks aren’t comprised only of cybersecurity, but also physical security risks, such as
cargo theft.
But the size and complexity of modern supply chains make managing security increasingly
challenging: products change hands a multitude of times before reaching the end consumer, and
often, multiple nations are involved in the process from production to delivery.
There’s a trust factor involved, of course, pointing to the need to carefully and thoroughly vet
vendors, suppliers, and other partners. Supply chain security requires a multi-layered approach to
create a secure, end-to-end physical chain of custody with clearly defined and enforced protocols,
strict adherence to regulatory guidelines and standards, secure facilities and adequate surveillance,
and thorough contractual agreements with trusted partners, as well as adequate cybersecurity tools
and solutions to protect sensitive information.

5. Regulatory compliance
Regulatory compliance is another prominent pain point in supply chain management, and
globalization makes compliance even more complex. Environmental regulations, global trade
rules, product integrity requirements, and other regulatory concerns have a major impact on the
supply chain from end-to-end. Effective regulatory compliance means adhering to a variety of
guidelines and standards including:
 Mandatory national, state, and local/municipal regulatory requirements
 Industry standards
 Trade agreements, including bi-lateral and multi-lateral trade agreements
 Contractual obligations
 Customer expectations
 Non-governmental organization (NGO) expectations
Effective compliance management is a multi-faceted approach that encompasses governance and
leadership, risk assessment and due diligence, standards, policies, and procedures, training and
communications, employee reporting, testing and monitoring, continuous improvement, and other
processes and functions.