Supply and Demand: Building Links In Your Supply Chain

Business.com / Strategy / Last Modified: February 22, 2017

Supply chain management may not be the sexiest area of business, but everyone business will have to deal with it to gain a competitive edge.

At some point or another, every business owner will hear the term "supply chain management" thrown around, usually alongside the terms "logistics" or "operations management." 

Use of the term "supply chain management" arose in the late 1980s and has come to refer to the process of influencing the behavior of supply chains in order to achieve beneficial results.

Supply chains include all of the businesses, companies, and other activities needed to develop, produce, and ship a product or service. So essentially, supply chain management centers on making decisions which manipulate or optimize some part of a business's supply chain in order to gain a competitive market edge.

How Does Supply Chain Management Work?

Every business faces a unique set of challenges and market demands, which in turn require different methods of supply chain management. Despite this great variance, the types of decisions all businesses encounter regarding supply chain management still basically fall into five broad categories:

  • Production
  • Inventory
  • Location
  • Transportation
  • Information

Production: The Manufacturing Area

Production decisions focus on questions like what products to manufacture, how much manufacturing to undertake, and when to commence or complete manufacturing of such products.

Tasks like developing production schedules, utilizing workflow, arranging equipment maintenance and handling quality control concerns all fall into the production category of supply chain management activities.

Related Article: Company Cars: To Buy or To Lease, That is the Question

Inventory: Handling Storage

Decisions regarding what inventory to stock, how much inventory to stock, and what stage of production to hold inventory in encompass the inventory category of supply chain management activities. Businesses often use their decisions or other activities in this area of supply chain management to provide buffers against future uncertainties in their supply chains.

Location: Where To Put What

The location category of supply chain management activities deal with decisions regarding where a business should locate its production and inventory facilities, what locations provide the most cost-efficient solutions for production or storage, along with other locational factors that can affect a business. Location decisions end up determining the possible avenues through which a business can deliver their product or service to its customers.

Transportation: Delivering Products & Services

All of the activities involved in delivering a business's product or service to customers constitute that business's transportation area of supply chain management. Decisions regarding what shipping systems to use, which carriers to use and how to prepare products or services for a shipment fall into this category.

Related Article: What You Really Need for Better Vehicle Tracking

Information: Collecting & Handling Data

Information activities in supply chain management include identifying relevant information for a business to collect, assigning appropriate information collection methods, determining how much information to collect and communication information across a supply chain.

Basically anything to do with how a business receives, records, transmits or otherwise uses data and other forms of information falls into the information category of supply chain management. Many businesses implement advanced forms of database marketing, communication platforms or other digital products in order to maximize their productivity and efficiency in the age of rapidly advancing modern technology.

Putting it All Together

The act of making coordinated decisions regarding business activities in the production, inventory, location, transportation and information areas of a supply chain constitutes supply chain management. Similar to the movements of a conductor directing an orchestra, supply chain management decisions direct both production and distribution while impacting a business's overall workflow.

Who Should Look Into Supply Chain Management?

Both large and small business owners stand to benefit from implementing supply chain management practices. Supply chain management techniques and strategies help improve productivity and cost-efficiency by optimizing business performance in key supply chain areas. While some business owners find attempting to coordinate so many different parts of a supply chain daunting, various solutions exist which can help make the task much easier.

Many business owners turn to business process management to alleviate their supply chain management issues. Modern software and process management systems  can automate or coordinate a large number of the activities associated with the supply chain, thereby dramatically reducing a business's management workload while promoting efficiency in certain parts of the supply chain.

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