What is supply chain? A definitive guide.

By Jack Grimshaw
What is Supply Chain? A definitive guide to the Supply Chain industry. Getting the supply chain right is make or break to companies - especially in the...

What is Supply Chain? A definitive guide to the Supply Chain industry. 

Getting the supply chain right is make or break to companies - especially in the modern world, where consumers expect to receive goods quicker than ever before. But what actually is the supply chain?

A supply chain is defined as the entire process of making and selling commercial goods, including every stage from the supply of materials and the manufacture of the goods through to their distribution and sale. Successfully managing supply chains is essential to any company hoping to compete.

Why is supply chain management (SCM) so important?

An efficient, optimised supply chain is already so important to the fulfillment of customer orders for a company. But when managed correctly, it can also result in much lower costs, and a faster production cycle. SCM is the umbrella term that covers product development, sourcing, production, procurement, logistics and more when it comes to operations in the supply chain. Without it, companies run the risk of reducing its customers, and losing a competitive edge in respective industries.

Efficient supply chains will work with an effective returns process. It has been found that customers are 71% more likely to become returning customers if they are happy with the way their return process was handled. 

SCM isn’t just about creating the most efficient process possible, it’s also crucial to mitigate risks and ensure everything runs smoothly. This is because so many elements make up the supply chain, from manufacturing sites and warehouses to transportation, inventory management and order fulfillments. 

Each step of this process carries countless risks and possibilities to derail an entire customer order. Minimising delay, optimising the time of day that goods are moved, the length of time that inventory is held for and the order dispatch process are all points that can have huge impacts on the operation. Without an optimised SCM process in place, the chain can fall apart from the very beginning. 

The “Amazon Effect”

Modern consumers are expecting to receive their orders sooner than ever before. The digital marketplace continues to expand beyond the traditional retail business model every day, and with that, customer expectations grow. This has revolutionised the way that supply chain professionals must work to ensure orders are processed and fulfilled. 

Amazon is open 24/7. Orders are processed instantaneously, and are expected to be sent to pick in the warehouse immediately. With next day delivery, and even same day delivery, being options that Amazon and the majority of online retailers offer, the “Amazon Effect” has completely redefined the way that supply chains operate. Procurement staff must be prepared to fulfill more blanket orders at a faster rate, and orders from foreign countries, like China, must deliver on smaller order with much faster turn-around times. 

Supply chain in the NHS

Supply chains aren’t only crucial to businesses looking to fulfill orders. The National Health Service (NHS) has operations across England and Wales to manage the sourcing and supply of healthcare products, services and food for NHS trusts and healthcare organisations. 

The organisation manages more than 4.5mn orders every year across 15,000 locations. The NHS supply chain primarily works on delivering savings for the NHS, reducing product and price variation, meeting the NHS’ diverse needs and providing clinical assurance. The NHS transformed its procurement operations in 2018, with the goal of saving £2.4bn by 2022-23 in mind. This redefined procurement operation is one of the most powerful and important in Europe.

Supply Chain Roles

CPO - A Chief Procurement Officer (CPO) is an executive role within the supply chain, focused on sourcing, procurement and supply chain management for a business. A CPO will focus on costs, ensuring they remain under control and constantly looking for ways to reduce them. They will also ensure the company’s procurement procedures are all in line with internal and external compliance guidelines - these will include government requirements and company initiatives. 

CLO - A Chief Logistics Officer (CLO) manages the transfer of goods or services that a company offers to facilitate smooth operations. They will ensure the correct products are shipped in accurate quantities within the established timeframe, and will also provide logistical support to senior management in relation to challenges the company may face. Challenges such as truck driver shortages, tariffs like the ones seen in the US-China trade war and technology all face CLOs every day.

Supply Chain Manager - A Supply Chain Manager works closely with external partners and suppliers to produce the product, create inventory and sell products to outside markets. They will evaluate suppliers and negotiate contracts with vendors. Supply Chain Managers are often considered similar to Operations Managers, who take a more internally-focused approach to operations. Formulating policies, taking control of daily operations and workflows, and overseeing general processes of workers are the primary responsibilities for Operations Managers. 

Supply Chain Best Practices 

In a growing global market, it can be difficult to achieve success. An optimised, end-to-end connected supply chain can drive your company forwards in the competitive ecosystem. 

  • Real-time supply chain planning - Real-time, connected supply chain planning can help ensure your company isn’t relying on historical data when planning. If any unforeseen circumstances cause disruptions, it can be very difficult to overcome when using historical data. Scenarios can be dealt with much more efficiently when real-time planning is in place.

  • Identify where technology can improve processes - Highly automated end-to-end cross-functional processes can significantly improve efficiency and reduce costs in your operations. Automation can help many companies solve the issues that surround a lack of visibility in their supply chains. Selecting the correct technologies and software solutions can improve data reporting and strategic planning.

  • Maintain healthy supplier relationships - Supplier relationships are crucial to your supply chain. These connections require constant maintenance and two-way communication between the buyer and the seller. There should be a specific, optimised platform in place for conflict resolution, should anything arise, to ensure the continued success of your relationships. 

Align your strategy - A supply chain council can help with this process. If the strategy isn’t aligned to the company’s strategies, it will not perform to the best of its capabilities. A coordinated, efficient supply chain strategy, aligned with the organisation’s, can enhance operational costs, improve quality throughout the supply chain and reduce errors whilst streamlining procurement.

For more information on all topics for Procurement, Supply Chain & Logistics - please take a look at the latest edition of Supply Chain Digital magazine.

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