What is supply chain management? A closer look at this fast-growing field
Imagine you’ve just created a recipe for the best chocolate bar on earth. You have to share it with the world, so you decide to start a company. All you need is ingredients, wrappers and maybe a warehouse — right?
Not quite. You’ll need a full supply chain to deliver a product to the customer. It may seem like a relatively simple operation, but there are a lot of complicated steps within that process. You’ll need to determine everything from how to get the parts (or ingredients) you’ll need for your product to what kind of energy you’ll use to power your production line. You would also need contingency plans in the event of a surplus, a shortage or even a weather-related disruption.
You can see that the supply chain is not so much a chain as it is a dynamic network of moving parts. It has long been a cornerstone of the American economy, even as it evolves with streamlined technological innovations. In fact, the supply chain currently accounts for 37 percent of all jobs across the nation. Many of these professionals are dedicated to managing the supply chain. But what is supply chain management, exactly? If you’re curious to learn more about this burgeoning field, read on to dig into the details.
What is supply chain management and what does it entail?
Supply chain management is an interdisciplinary field that requires a lot of strategy. You have to think like a business executive, a statistician, a truck driver and a consumer — all at once.
When products don’t arrive on time, intact or in the right quantity, it has an effect on your bottom line. For any industry that relies on quality and efficiency, the supply chain becomes the fuel of business.
Thankfully, no one has to manage it on their own. Depending on how large the organization is, a different person or team may manage each step of the journey. With that in mind, it’s helpful to gain a clearer understanding of the three core phases of the supply chain and the professionals that help facilitate each step.
1. Obtain the goods
The first phase is all about making sure you have all the basic elements — and the appropriate quantities — needed to create your product.
This is the phase where you secure the parts or ingredients you need for your product. You will find many different job titles related to this part of the chain. Here are a few:
- Purchasing manager
- Purchasing agent
- Executive buyer
- Resource advisor
Procurement careers are an interesting blend of technology, logistics and business. To purchase from a vendor, you first need to do your research and compare your options. Because such a large portion of your cost comes from acquiring materials, it’s important to negotiate realistic terms. This requires you to establish a professional relationship with the vendors.
In procurement, you also need to maintain moral standards. There have been countless scandals about businesses using materials produced by unethical labor. Not only is this a humanitarian issue, but it can also cost companies by damaging their reputation. As a procurement specialist, you have the power to protect your organization and its communities.
When you think of inventory, you may think of counting boxes of frozen beef patties at your first fast-food job. Knowing how much inventory you have is even more important for a larger operation. The cost of storing materials, which can include rent, temperature control and security, can begin to eat away at your profits. But if your supply is too low, you run the risk of back orders and customer dissatisfaction.
Inventory is about predicting how much you’ll need, when you’ll need it and in what locations. Positions in this stage of the chain often involve a lot of research and adapting to supply and demand.
2. Assemble the goods
Once you have all the necessary components, it’s time to create the product.
Manufacturing positions in the supply chain are abundant. They can include a range of roles, from the employees who assemble the products to the people who decide how they’re assembled. This link in the chain is responsible for designing, planning and producing a product.
As technology continues to evolve, manufacturing managers are faced with decisions about how to incorporate things like artificial intelligence into their assembly process. They also need to make choices regarding staffing. How many individuals do you need to operate the machines? Would automation be more cost-effective without sacrificing quality? These are the kinds of things you may encounter in the manufacturing phase.
If something goes wrong during product assembly, you and your business could land in a lot of hot water later on. This is why it’s important to have quality control within the supply chain. When manufacturing processes become too automated, it can be easy to miss mistakes. Occasional errors are unavoidable, so you’ll have to determine how they were caused and find out how to avoid them in the future.
Quality control can also refer to the quality of your manufacturing process. Done right, manufacturing should evolve to meet shifting industry needs.
3. Distribute the goods
The final phase, and arguably the most important, is making sure your product ends up in customers’ hands.
Just as you chose your material vendors, you’ll need to select suppliers to carry your product — grocery stores, gas stations, national retail chains and so on. It may seem like a good idea to get as many suppliers as you can in order to sell more, but there are a lot of factors that go into choosing a supplier. How much will they mark up your product for their profit? Do you want your brand to be seen as exclusive or accessible?
You’ll also need to decide if you want to provide customers with an e-commerce option. Offering online ordering and direct-to-consumer shipping may be another process you want to ensure is in place within this phase of the supply chain process.
Suppliers will not typically seek you out — especially if your company is new. You will have to go to them. While businesses hire representatives to pitch their product, you will still need the logistical knowledge to find the right suppliers and make thoughtful decisions.
You finally have a quality product ready for customers. Even when you’ve reached the distribution stage, there are still a lot of steps left to ensure that your company turns a profit. You need to consider packaging, volume and mode of transportation. Again, there are ethical considerations.
Major distribution systems can contribute to air pollution and other environmental issues. It’s important to follow governmental regulations to remain compliant, but also to maintain your business reputation.
Become a strong link in the supply chain
Just what is supply chain management? As you can see, it’s far from a cut-and-dry process. There are multiple careers available at every stage. You now have a better idea of how important supply chain professionals truly are — chocolate bars don’t just appear in the grocery store.
If you’re interested in being a part of managing the supply chain, consider what steps you may need to take to advance to these types of roles. Visit University of Massachusetts Global’s Supply Chain Management & Logistics program page to learn more about a self-paced, online degree that will teach you what you need to know about inventory management, quality control, product distribution and more.
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