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Supply chain management and how you can optimize yours

When it comes to keeping your supply chain running smoothly, good supply chain management is an absolute must. We give you a rundown of the most important tasks, components, benefits and goals. And we show you which tools and technologies you’ll need to modernize your supply chain management.

Definition: What is supply chain management?

Supply chain management, or SCM for short, is the planning and management of all flows of goods and information throughout the entire value chain. The task is to coordinate — and most importantly optimize — all internal and intercompany logistics processes within the supply chain.

The supply chain

The supply chain covers the entire spectrum of activities that are essential for manufacturing products and getting them to the customer. It begins with the procurement of raw materials and individual components, extends through the production of intermediate goods, and ends with delivery of the final product to the end customer.

Collaboration is key

Close collaboration with all sales partners in the supply chain plays a big role in supply chain management — from suppliers, manufacturers and distributors, to dealers and, last but not least, the customer. It adds up to a smooth-running supply chain from which all stakeholders profit.

Tip: The following video offers a quick overview of the complex subject of supply chain management. See what makes up a supply chain and why good management is key.

Supply chain management vs. logistics

Although the terms “supply chain management” and “logistics” are often used interchangeably, they are not the same! Supply chain management is an end-to-end, cross-company view of the supply chain, its processes and stakeholders. Logistics, on the other hand, is the management and coordination of the flow of goods and information within the company.

Every company has its own logistics processes for procurement, production and distribution. It is the task of supply chain management to collectively plan these processes throughout the entire supply chain — from the first supplier to the last customer. Logistics is thus just one part of supply chain management.

The key components of supply chain management

A range of tasks and components make up supply chain management, including:

Supplier relationships

Supplier management, i.e. building and cultivating relationships with suppliers, is a central task of supply chain management. It creates the basis for a fruitful partnership and a smooth exchange of information. The aim is to continually analyze and improve all supplier-related processes.

Logistics

One goal of supply chain management is to structure logistics processes as efficiently and effectively as possible. Key task areas include procurement logistics (ensuring materials are procured), production logistics (manufacturing products efficiently and cost-competitively), warehouse logistics (storing goods securely and cost-efficiently), distribution logistics (distributing goods to customers and dealers) and waste management logistics (disposing of waste products and unneeded materials).

Warehouse management

Warehouse management is all about the storage of goods and the management of stock. This area fulfills various functions, such as safeguarding minimum stock levels, keeping buffer stock, or enabling goods to be sorted and transformed — e.g. decanting or packing — prior to further processing.

Inventory management

This area looks at optimizing warehouse management and covers tasks such as demand planning (how will demand develop?) and inventory planning (what inventory is required?). A goal of supply chain management is to reduce inventories throughout the entire supply chain while simultaneously safeguarding the ready availability of goods. Essentially, it’s about maintaining optimal levels of inventory at all times.

Transport

Managing the transport of goods between destinations and choosing the right type of transport both have a huge bearing on delivery times, costs and customer satisfaction.

Demand forecasting

Demand forecasting uses historical data to determine future trends in customer demand. These predictions provide a sound basis for accurately planning the procurement, production, storage and transport of goods, thus helping to improve supply chain management.

Customer service

Customer service carries a lot of weight in supply chain management. Fast, dependable delivery times, high delivery quality and quick responses to customer inquiries are just some of the key factors that go into enhancing customer satisfaction and customer loyalty.

The goals and benefits of supply chain management

Hi Doxi, please name the goals and benefits of supply chain management!

Good supply chain management not only improves performance throughout your entire supply chain; it also makes you more efficient and adds customer value. In particular, you benefit from:

Enhanced efficiency

With SCM, you unlock optimizations to your internal and intercompany processes and collaborate better with your sales partners. The result is a smooth-running supply chain with short lead times and an optimal cost-benefit ratio.

Security

SCM helps you curate a smooth-running, reliable supply network and mitigate supply risks. It also means you are assured of staying compliant with the relevant rules and statutory regulations.

Lower costs

Reduce your surplus stock levels, lower your storage costs, optimize how your resources are utilized, align production with demand — SCM helps you do all of this and more, to bring down your costs long term. In turn, you can offer your customers prices that are competitive but don’t eat into your profits.

Better supplier selection

SCM enables you to select the suppliers with the best conditions and safeguard high delivery quality and reliability, as well as a good price-performance ratio.

Customer satisfaction

Good SCM addresses the needs and demands of your customers. Ideally, the customer gets the best-possible product at a competitive price, sparking passion for the brand and building long-lasting loyalty.

Sustainability

The end-to-end overview of your supply chain and transparency on the origin, use and disposal of your products unlocks ways to increase sustainability and environmental awareness — by reducing waste and emissions, for instance, or switching to renewable energies and using more sustainable (e.g. recycled or biodegradable) materials.

The essentials of successful supply chain management

Successful supply chain management is built on overarching collaboration and proactive information-sharing between partners throughout the supply chain. From transparent information on price trends or expected delivery dates, to regular feedback and much more besides. For it to work, not only does there have to be a high degree of trust, but also binding common guidelines with clear rules and responsibilities. Ultimately, all parties profit from the transfer of know-how.

To make information-sharing easy, you will need the right tools — like an enterprise resource planning (ERP) system or an enterprise content management (ECM) system — to manage all of the documents associated with supply chain management. Powerful systems are capable of communicating with one another and automatically collecting relevant data on a continuous basis.

Bernard Krone Holding: End-to-end information logistics with ECM

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What is a typical supply chain management process?

Plan, buy, make, deliver — that’s the supply chain management process in a nutshell. In detail, it looks like this:

  1. Planning: The first step is planning the supply chain. You select suitable suppliers and identify which materials you require.
  2. Procurement: In this stage, you order all of the raw materials, components and other items needed in your production processes.
  3. Production: Production is where the products are manufactured and components are assembled.
  4. Storage: The intermediate and end products you have produced require storing until further processing or delivery to the end customer. Continuous inventory control is also a key part of this stage.
  5. Distribution: The finished goods now need to be distributed to dealers and end customers.
  6. Returns management: After shipment and delivery to the customer, the focus turns to checking and processing returns.
  7. Customer service: Dedicated customer service is the last, but by no means least important, part of the supply chain management process. You respond to customer inquiries, advise customers on your product offerings, and provide transparent information on the order status and more throughout the supply chain.

Information and documents in the supply chain

Alongside planning and managing the flow of goods, the other key area of supply chain management is managing flows of information. Huge volumes of information and documentation are generated throughout the supply chain, including:

Order data

Order data is created whenever you receive a customer order or place an order with a supplier, etc. Typically, these take the form of purchase requisition documents and order confirmations.

Supplier data

Collaborating with suppliers involves maintaining a huge amount of partner-specific information — like your supplier contracts, which define the conditions of collaboration, or certificates, which allow you to verify compliance with all relevant standards and requirements.

Invoices

Different invoices come in and out along the supply chain, including invoices for procurement, transportation, customs duties and sales.

Inventory lists

You document all goods in storage in inventory lists and keep track of your inventory.

Transportation documents

CMR waybills, delivery notes and customs papers are just some of the important documents involved in transporting goods.

How important is document management in the supply chain?

Given the sheer volume of information and documents generated throughout the supply chain and which are shared with all stakeholders, transparent information management and careful document management are essential. An ECM platform like Doxis brings together all information in one place, giving you uncomplicated access to all of the data you need for your end-to-end supply chain management.

Here are some of the ways an ECM solution benefits your SCM:

  • with onboarding and managing suppliers,
  • with handling orders,
  • with processing invoices,
  • with fulfilling compliance requirements, and
  • with analyzing data.

Not only that, but an ECM system makes B2B integration easy, facilitating simple collaboration with suppliers, business partners and customers throughout your supply chain. You can exchange information in real time and automate important business processes. For instance, the software automatically reminds you if a supplier certificate is expiring and transfers the updated information directly into the system as soon as the supplier uploads the new certificate to the shared workspace.

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Why it pays to modernize your supply chain management

Supply chains are growing increasingly complex and global. Recent events have highlighted the vulnerability of today’s supply chains. Like the Covid-19 crisis, which caused large-scale disruptions and delays. One of the big tasks of modern supply chain management lies in reshaping supply chains to make them more robust, more agile and more resilient to crisis.

The digital transformation of your company is an important step towards modernization and holds one of the keys to your success: transparency. You benefit from reliable data delivered in real time — to support you with smarter decision-making and enable you to respond faster to change.

Today, you can choose from promising technology solutions that will help you to tackle these challenges and optimize your supply chain management. Some of the biggest trends are:

  • Internet of Things (IoT): IoT sensors capture information in real time and help you monitor the supply chain. Detect e.g. choke points and issues at an early stage, giving you more flexibility to respond.
  • Artificial intelligence (AI): AI systems help with complex decision-making and automated process optimization. They can provide support with forecasting demand, analyzing risks and more besides.
  • Blockchain: Blockchain technology enables you to track the status of goods deliveries transparently and in real time, ensuring that all stakeholders are kept constantly up to date.

If you want to stay competitive, adapt to constantly changing requirements in the business world and optimize your supply chain for all stakeholders, modern, digital supply chain management is a must.

Frequently asked questions on supply chain management

What is meant by supply chain management?
Supply chain management, or SCM for short, is the end-to-end planning, management and optimization of all activities throughout the supply chain, from the procurement of raw materials to delivery of the product to the end customer. It covers components such as supplier management, logistics, warehouse management, inventory management, transportation and customer service.
What is the difference between logistics and supply chain management?
Logistics is just one part of supply chain management, and relates to the control of goods and information flows within the company. Supply chain management, on the other hand, is an overarching concept that considers all activities, processes and stakeholders throughout the supply chain and works to optimally coordinate all of these elements.
Is procurement part of the supply chain?
Procurement is an important sub-area of the supply chain. It is responsible for purchasing raw materials, monitoring their quality and assessing suppliers. Procurement thus works to ensure that the right quantity of materials in the right quality are available to production on time.
Why is supply chain management so important?
Supply chain management ensures that you get the desired goods to your customers via the most economical routes. This increases the efficacy and efficiency of your supply chain, and sustainably improves both customer satisfaction and your cost-benefit ratio.

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