What is supply chain management? Distinguishing SCM and logistics

What is Supply Chain Management? What role does supply chain management play in the entire business process at the enterprise? Invite businesses and Viindoo to find detailed answers through the article right below.

>>>> See More: SCM software

1. What is supply chain management?

Supply Chain Management is the process of managing and optimizing supply chain operations from the supplier to the end customer. Supply chain management includes the management activities involved in the production, storage, transportation and distribution stages. The goal of supply chain management is to increase productivity, reduce costs, improve product quality, and satisfy customer needs.

If businesses operate well SCM activities, they will soon locate competitive advantages as well as maximize value for customers.

A complex supply chain model for every businessWhat is supply chain management?

>>>> Read About: What is a supply chain? Components in the supply chain

2. 5 important stages in supply chain management

After presenting the conceptWhat is supply chain management?, Viindoo would like to continue to introduce about 5 core stages in supply chain management activities.

2.1 Planning

For best results, the supply chain management process begins with supply planning tailored to customer needs and production. Companies must anticipate future customer needs and come up with a plan accordingly.

To get the most out of your planning process, use the materials management and supply chain analysis features of your ERP system.

With this application, businesses will form a plan that can well meet the needs of customers. In addition, this also contributes to minimizing the occurrence of the bullwhip effect (the phenomenon of distorted information about market demand for a product).

2.2 Searching for suppliers

An effective supply chain management process is highly dependent on close relationships with suppliers. Enterprises need to choose their own suppliers. This supplier is required to be able to supply materials in a timely and accurate manner and to always follow the agreed upon arrangements.

Suppliers need to ensure the following:

  • The raw materials meet the manufacturing specifications required for the production of the goods.
  • Prices are in line with the market.
  • Suppliers have the ability to provide materials for emergencies and force majeure cases.
  • Reputable supplier, on time delivery and good quality.

Suppliers play an extremely important role in the supply chain of enterprises, so it is necessary to choose carefully. Any choice can have a positive or negative impact on the business in the next stages.

A complex supply chain model for every businessChoose the most suitable supplier

2.3 Producing goods and products

LIVE At this stage, the enterprise will deploy the production of products. This process will include planning, testing, monitoring as well as ensuring compliance with standards in production. After that, the product will be packed, preserved and shipped on time.

This is the key stage that determines the quality of the final product. Therefore, in order for finished products to be more complete, to be able to compete well with competitors, businesses now often apply modern technologies such as IoT and AI into the production process.

2.4 Delivery

Delivery is considered an important logistics stage. The distribution process is often seen as a contributing factor to the brand image, because up to this point, the customer has not yet interacted with the product. Businesses can chooseWhich shipping method best suits your type of goods and your budget?

2.5 Returns

Returning is an undesirable stage, but every business needs to prepare all the physical and psychological premise to face this situation. Usually, goods returned by customers are due to defective product or product that no longer meets the need.

Returns are also caused by factors from other stages, including production, inventory management, and shipping.

Buyers return goods for various reasonsBuyers return goods for various reasons

>>>> More Reference: Supply chain planning

3. Distinguish supply chain management and logistics

Supply chain and logistics management are two terms that are widely used in business. However, not everyone knows the difference between these two terms.

Logistics management is an important component in the supply chain management work system. This activity involves the process of transporting goods and services from the point of origin to the customer. Some of the key activities of logistics management include: control, information gathering, planning, execution, storage, transportation, evaluation and reporting.

Managing the supply chain
Logistics management
Increase the quality of finished products, save input costs in the supply chain
Improve the quality of logistics activities, optimize costs
Operates on a large scale. SCM can be applied in the system of many enterprises cooperating in production and business to distribute products to the market.
Apply within the internal scope of a business
Core MissionSupply chain management will include main activities such as: Management of production, supply, partners, customers, logistics, ...Logistics management refers to warehousing, ordering and shipping activities.

Readers can refer to the following articles: Distinguishing logistics and supply chains: Relationships and differences for a better understanding of these two concepts.

4. The role of supply chain management in enterprises

After learning the concept in detail What is supply chain management? Enterprises should know that this is a core component in their operation and management process. This activity must be performed by all parts of the organization in order to bring the final product or service to the consumer.

Therefore, with The role of supply chain management is so important, if a business operates its supply chain well, it will create advantages as follows:

  • Use the right people, right jobs
  • Creating an effective business operating platform, ensuring progress and quality throughout and synchronously
  • Ensure the supply process of goods with low inventory, minimize the risk of return, save operating costs, increase net profit
  • Affirming business position, increasing competitive advantage in the market
  • Shaping a comprehensive and unified culture within the enterprise
  • Building solid business potential, thereby further increasing business cooperation opportunities with major domestic and foreign partners

In detail, here are the statistics of the value that effective supply chain management brings:

  • Inventory: 25 - 60% off
  • Supply chain costs: 25 - 50% reduction
  • Quality of order supply arc: 30 - 50% improvement
  • Accuracy of production forecast: Up 25 - 80%
  • Profit after tax: Increase over 20%
Supply chain management plays an important role in businessSupply chain management plays an important role in business

5. Supply chain management model in enterprises

Currently, supply chain management models are very diverse, corresponding to different sizes and types of business lines. However, in general, the most popular are still the two models that will be introduced by Viindoo right below.

5.1 Simple supply chain model

The simple supply chain model is effectively applied in small and medium-sized enterprises. These enterprises often produce and supply to the market a small number of goods and very few types.

With this model, businesses will actively implement all stages in a supply chain, including activities such as:

  • Purchase raw materials directly from a single supplier.
  • Directly produce and supervise the stages to form the final products and goods.
  • Transporting and selling products and services to consumers.

Here are some notes that businesses need to know when applying each of these models:

  • Choose a reputable input material supplier with a clear brand name.
  • Implement a methodical and scientific production process and optimize all stages of management.
  • Regularly monitor the production process and product supply until it reaches the user.
A complex supply chain model for every businessSimple supply chain model for small business

>>>> See More: Supply chain KPIs

5.2 Complex supply chain model

The complex supply chain model can be applied to any business from small to large. This model covers many product lines, locations as well as distribution units.

When applying a complex supply chain model, businesses will conduct the following main activities:

  • Purchasing raw materials from many different parties such as partners, external suppliers, factories in the same system of the Group,...
  • Deploy all stages of production, supervise the working process of employees to create a system of final finished products. In addition, enterprises can also create materials for other companies in the same system of the Group,...
  • The company directly transports products and sells goods to customers or continues through intermediary distribution units to launch products to the market.

In addition, the application of this model also needs to follow some of the following notes:

  • The complex supply chain model creates more challenges for businesses, so it is necessary to build a detailed, scientific and logical management process.
  • The product system is diverse, it is difficult to control according to the traditional method. Therefore, businesses can choose to use supply chain management software suitable for their units.
A complex supply chain model for every business
A complex supply chain model for every business

The above article has explained in detail the concept of What is supply chain management? as well as the latest management models. Viindoo Hopefully this will be a useful document to help businesses perfect the supply chain management process at their units. If your business is still having problems with supply chain management, please contact Viindoo immediately for quick support.

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Jun Nguyen April 27, 2023