Here’s a question, do you know what your supply manager is up to when you’re not looking? Don’t worry, I’m not saying that you should watch him like a hawk and make sure all your supplies are still there, but rather how much do you really know about what he is doing to ensure a successful and cost-effective supply chain management process?
If I am to guess, not a whole lot. Which is why I created this article to help you better understand the supply chain management process, along with its five steps. Hopefully, with that, you’ll also have even more respect for all the hard work and help from your supply manager.
What’s in the Supply Chain Management Process?
Now, your supply chain management process or SCM can look anything you want really. This will depend a lot on your industry, market you are in, company culture, supply manager and a bunch of other things. Of course, you probably want it to be as simple and effective as possible.
Which is exactly what the Supply Chain Council went for when they created their Supply Chain Operations Reference model or SCOR.
SCOR was created with the idea to help businesses of all sizes standardize and improve their SC processes and includes best practices every supply manager needs to follow to identify and resolve problems in the supply chain.
The model includes five steps or stages:
Let’s take a closer look at each stage.
Step 1: Plan
Now goal gets achieved without first making a good plan. The first step of a supply chain management process is planning, which involves creating a viable strategy that will return the maximum results, i.e profit or ROI.
This step poses a question to the company:
Should we manufacture the product or component ourselves or should we purchase it from a supplier?
From here, you get to decide whether to:
- Manufacture domestically
- Manufacture internationally
- Buy from a domestic supplier
- Buy from an international supplier
- Outsource manufacturing
And these are just five options, with lots more in-between. But it’s essential to get this first stage of the supply chain management process right, because your decision here will influence the later four stages heavily.
Step 2: Source
The second step of a SCM process involves finding the best and most reliable suppliers. This will ensure the production process goes without a hitch. Building a strong and lasting relationship with suppliers is crucial. Any mistake by the supplier will reflect on you as well.
This stage includes constant assessment and revision of the supplier’s performance and making sure they meet your requirements.
Step 3: Execute
In this stage, the supply manager probably has the most on his plate. He needs to ensure all stages, from designing, producing, testing and packaging of manufacturing a product that will ultimately arrive in the customer’s hands go without problem.
To do that, the supply manager needs to schedule all of these activities and then monitor their performance closely. The goal here is to achieve maximum efficiency and nothing below.
Step 4: Deliver
The finished product won’t matter much to the customer unless you deliver it at the right time, right place and in the right quantity.
This is why logistics plays a huge role in the fourth stage of the supply chain management process. Anything can go wrong once the product leaves the manufacturing facilities, whether in the warehouse, with the third-party carrier, or with the invoicing and payment systems. To ensure things go smoothly this close to delivering the product to the final customer, the supply manager can needs to monitor logistics and keep track of everything using modern online logistics tools.
Step 5: Return
Finally, in the last stage of the supply chain management process, the supply manager needs to deal with defective or damaged products, replacing them, authorizing and providing refunds for them.
Needless to say, your company needs to listen carefully to every query and complaint by the customers and respond quickly. This is usually the stage which can hurt your organization the most, especially if you refuse or don’t acknowledge the return or refund quickly enough. Then you can say goodbye to that customer.
Having an over complicated supply chain management process helps no one. Not your organization, not your customers or supplier, no one. The SCOR model on the other hand ensures that your products get in the customers satisfied hands.
Do you have any questions or comments about this supply chain management process? Let us know in the comments below and don’t forget to sign up for early access to Purchase Order Plus software.