Supply Chain Management System

What Are the Five Basic Components of a Supply Chain Management System

Supply Chain Process involves many activities that entail handling various elements of a supply chain management system. When eating a slice of bread, it is good to remember that the slice production process did not start at the shop where you bought it. A lot had been involved, and the shop that sells the loaf of bread is part of a long chain. All the constituents of the supply chain are crucial in determining the end product. That’s why there is a need to have components that bring the constituents together, otherwise called the basic components of a supply chain management process. What are these components, and how do they contribute to the final product at the end of the supply chain? Keep reading to find out more from this article.

  • Planning

Of all the supply chain management system components, the planning stage is the strategic stage of the supply chain. This is where the supply chain manager lays down strategies to run the supply chain. In essence, it is the strategic portion of the supply chain. How a manager plans the supply chain process is imperative to the inventory and manufacturing processes within the business. At this point, the company uses analytics to match the supply and the aggregate demand and plan accordingly. Besides, the planning component is crucial as it involves using metrics to monitor and gauge the efficiency of the supply chain. An efficient supply chain management system is sustainable, costs less in production, while delivering value and quality to the customers.

When the metrics and analytics are used well, it gives a firm the right prediction of the supply-demand algorithm, which is critical in meeting demands and not having deadstock. Material Requirement Planning is one of the planning tools that many companies have used to gauge their needs and planned well for the business. In the long run, how much time and resources a company takes in planning will directly impact the returns.

  • Sourcing

After planning, the second element a supply chain manager looks at is the sourcing stage. This is the component that involves identifying the vendor who will help produce the goods and services with which the demand will be met. This component also involves identifying a vendor responsible for demand fulfillment in the most viable, efficient, and effective manner. Just like the planning component, sourcing also entails the use of metrics and analytics. First, the supply chain manager sits with the supplier and establishes the delivery and payment methods that the two parties will use. After this, the supply chain manager spells out the metrics and analytics that both parties sign for the improvement of the relationships. Internally, the manager clearly spells out the delivery receiving process to his team. For instance, how are the shipments going to be received and confirmed? How long is the receiving process planned to take?

  • Manufacturing
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Having completed the planning and sourcing stages, the next step involves the manufacturing process. Other scholars call this supply chain component ‘make.’ It is a crucial element of the supply chain which involves producing the products, testing them, packaging them, and preparing them for delivery. Although the first two components involved using analytics and metrics, this stage is the most metric-intensive process. Here, the products’ quality is measured, workers’ productivity is determined, and the general production output is gauged. Prior to the processes involved in manufacturing, the supply chain manager gauges the consumers’ preference and uses it as the basis for gauging how to transfer the raw materials to consumable goods. The manager stays in touch with the consumer to end up with a Win-Win product that benefits the consumer and the manufacturer while keeping the supply chain in continuous operation.

  • Delivering 

This is yet another component of the supply chain management system that involves direct or indirect interaction with consumers. It comes when the strategic plans have been laid, the vendor to supply the raw materials has been identified and contacted, and the raw materials have been converted into final products. This component is equally important as it stands in the middle of the supply chain manager, the manufacturer, and the consumer to taint or paint the company’s image. The consumers will have their demands and expectations stated, and it is the sole responsibility of the supply chain manager to ensure that the final end products are delivered with the company’s delivery channels and logistics in a way that satisfies or exceeds the consumers’ expectations. In fulfilling these needs, the company comes up with various freights to use, including rail, air, road, and ships, if the products are not easily perishable. The company receives orders from consumers, acknowledges, develops warehouses, and picks carriers to deliver them to the consumers. As all this happens, the business must ensure it has an invoicing system that confirms payments as they come.

  • Returning 
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Returning is the last component and stage of the supply chain process. Some scholars refer to it as the problem aspect of the supply chain management system. The company may supply excess or defective goods to clients who return them to the company. It also involves a support system that takes care of the customers with complaints and responding to their issues. Also known as Reverse Logistics, this post-delivery support process works to prevent anything that can potentially taint the company’s image and deteriorate its relationship with the consumers. On the flip side, the return process implies a similar course of action for the suppliers. If there are any defective or excess raw materials at the manufacturing firm, the supply chain manager authorizes their return to the supplier.

Conclusion

For a supply chain management system to run effectively, many parties are involved, the supplier, the company, and the consumers being the main parties. Five basic components connect these parties. The article has discussed these components, including planning, sourcing, manufacturing, delivering, and returning. Planning involves laying strategies, while sourcing means identifying a vendor. In manufacturing, the vendor’s raw materials are converted to goods, which are then delivered to the consumers. If the consumers encounter defects, they return the products to the manufacturer, who in turn returns excess or defective raw materials to the supplier.

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