An Introduction to Supply Chain Management

The mere mention of supply chain management, outside of business circles, tends to set eyes rolling. While it may not be of interest to the average lay-person, it is an item of great interest to those in the business community. Supply chain management is a crucial element of good overall business management. Long term viability and corporate profitability are critically dependent upon it. Let's spend a few minutes exploring the basics of supply chain management.

Supply chain management refers to the process by which raw materials are acquired and used in the manufacturing of a product. It also takes into consideration the delivery of finished goods, and the ability to process returned goods. Ideally, these processes should function as an organic whole. The entire point and purpose of supply chain management is to ensure that products can be produced and delivered in an efficient and profitable manner.

Supply chain management is comprised of five primary elements; plan, source, make, deliver, and return. Each of these topics represents five distinct elements of the production process. The planning stage is the stage in which strategic plans for production are made. This stage is critically important, as it allows a company to develop a strategy for managing their production process flow. Metrics are also established at this time, to ensure that elements of production can be monitored.

The next stage is equally important, as it is an extension of the planning phase. The source phase refers to the early implementation of the strategic plans decided in the previous planning phase. It is during this phase that suppliers of raw materials and components are decided upon. Pricing, delivery, and payment terms are all considered at this time.

Next, we consider the production phase. This is also known as the start of the manufacturing process. Production related activities must all be accounted for at this time. Production, quality control, packaging, and shipping all come into play at this important stage. This stage is also the most intensive, regarding metrics. Production output, worker productivity, and overall product quality must be tracked and monitored closely.

Delivery is the next phase to consider. This area is generally referred to as logistics or shipping. At this stage, systems must be in place to coordinate orders. Orders must be processed, tracked, and delivered. It is also important to establish a payment system at this stage. Other considerations include warehousing, trucking contracts, and customs-related procedures.

One of the most oft overlooked elements of supply chain management is the returns process. Naturally, we would like to believe that the products we produce and ship are flawless. As you know, that is not always the case. Customers are not always satisfied, and systems must be in place to reintegrate returned goods into the production flow. Returned goods should always remain segregated until they can be reviewed and assessed. By adhering to the principles noted above, you can ensure that your company is sustainable and profitable for years to come.