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Supply chain management: What businesses need to know

Supply chain management (SCM) is a vitally important business feature for many industries, having an impact on every aspect of the supply chain, from supplier to customer. Every detail of this process must be managed carefully, as even the smallest mistake could lead to delays, customer frustration and lost revenue.

What’s more, supply chain management does not only refer to the movement of physical products through the supply chain. Any data associated with these products, including invoices, schedules and delivery information, also needs to be managed appropriately to ensure that businesses have visibility and clarity across the length of the supply chain. When employed effectively, SCM can help reduce stock levels, boost transaction volume and increase revenue, which is why many businesses are now looking at software solutions in order to gain a competitive edge.

Common software approaches

There is a broad spectrum of SCM software packages for businesses to choose from, each with their own bespoke features. Some of the most commonly implemented aspects of supply chain management software include:

  • Customer requirement processing – Unsurprisingly, this step of supply chain management involves making sure that a business is able to fulfil its customer requirements. This could involves a product availability check, as well as the processing of customer sales orders or similar information. Suppliers will then feedback on whether the requirement can be met, so it is crucial that information can flow quickly and reliably between sales and supply teams.
  • Purchase order processing – This stage of SCM involves businesses sending out purchase orders, or POs, to their supplier. As opposed to previous communication methods like phone or email, SCM software simplifies this process for both the supplier and customer. Businesses can make requests or amendments in real-time and suppliers will be immediately notified. Suppliers can also easily search POs by a number of different criteria and confirm shipment details.
  • Inventory management – This is a vital aspect of supply chain management, as it enables businesses to balance supply and demand. Businesses are constantly juggling customer demands, which can be difficult to predict, alongside an adequate supply of products. Effective inventory management gives businesses real-time visibility of stock levels, across all their sales channels, as well as a clear way of overseeing incoming and outgoing inventory. Some element of forecasting may also help businesses to predict inventory issues before they occur.
  • Warehouse management – This element of SCM software is designed to support warehouse operations in their daily planning, storage, staff utilisation and resource management. Features could include the sorting of individual stock keeping units (SKUs), the management of storage locations, and control over staff productivity rates. Ultimately, the aim of warehouse management is to facilitate the efficient movement of materials around the warehouse.
  • Return management – Another feature of SCM software is accelerating the process of customer returns. Automating the claims process and the inspection of defective inventory can save businesses time and money.

The importance of data

One of the biggest ways in which supply chain management is changing is through the increasing use of data. IT systems can now provide businesses with much richer datasets than ever before, so important aspects like product lead times and minimum stock levels no longer consist of guesswork.

According to recent research, there are as many as 52 different data sources within a business supply chain, ranging from competitor pricing to social media feeds. Organisations that are not willing or able to utilise this information risk being overtaken by competitors that are. A study conducted by Accenture found that many businesses are already creating advantages through the use of big data analytics. 41 per cent have benefitted from faster and more effective reaction time to supply chain issues and 36 per cent have experienced greater integration across the supply chain. Businesses can use SCM software to better process and manage supply chain data, but gaining access to this data in the first place is sometimes challenging.

How the IoT will shake things up

One of the ways in which businesses are harvesting more supply chain data is through the Internet of Things. The use of IoT sensors promises to take supply chain visibility to whole new levels. Previously, businesses had to be content with knowing when an item was shipped and when it had been delivered. With the Internet of Things, businesses have real-time visibility, enabling them to better track products, manage inventory and reduce inefficiencies. What’s more, IoT data will be able to provide organisations with better quality control data, through metrics such as temperature. IoT solutions could also be used to introduce more automation into the supply chain, requesting stock replenishments without any manual intervention.

A report by DHL and Cisco, titled “The Internet of Things in Logistics,” claims that the IoT will generate $1.9 trillion (£1.3 trillion) of value in the supply chain and logistics industries and some businesses are already on-board with the technology. For example, the Food and Drug Administration incorporates RFID tags on their medication containers to better monitor the supply process. Any industry that involves the supply of sensitive materials, or which simply wishes to make the supply process more efficient, is likely to embrace the benefits that IoT can bring.

Embracing change

Many of the industries that rely on supply chain management may be resistant to change. After all, their existing relationships between supplier, manufacturer, retailer and customer have worked fine until now, so why change? The answer is because “fine” may not good enough when your competitors are using software and data to accelerate ahead of you. Often it is a case of demonstrating the greater efficiencies and increased revenue that can be generated through effective supply chain management. It is also important to note that not all supply chains are the same, and hence there is a wide range of software options available. Whether you need to manage a manufacturing supply chain or a pharmaceutical one, there’s likely to be a software package that can help streamline the process.

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