The essential guide to supply chain management

The essential guide to supply chain management

In today’s highly competitive markets, inefficiencies in your supply chain can directly hit your bottom line. And without strategic supply chain management, you risk losing customers to delays, stockouts, and quality issues. And nobody wants that.

Up ahead, we discuss what is supply chain management, why you need it, and some strategies to optimise key elements of your supply chain.

Understanding the modern supply chain

A supply chain is the end-to-end flow of goods, services, finances, and information in an economy. It has a network of stakeholders like suppliers, manufacturers, distributors, and retailers — working together to ensure a continuous supply of goods.

Think of it as interconnected steps in delivering the finished products to the consumer, from sourcing raw materials to last-mile transportation.

For example, here’s what a simplified version of a smartphone supply chain would look like:

Also, note that supply chains aren’t the same for every business. Their models can differ based on demand patterns, consumer expectations, and product characteristics.

What is supply chain management?

Supply chain management (SCM) is the process of planning, controlling, and executing the smooth flow of goods, services, and information from where they start to where they’re needed. It covers handling raw materials, work-in-progress items, and finished products. And it integrates vital processes like sourcing, manufacturing, logistics, warehousing, and last-mile deliveries.

An effective SCM ensures you have the right product, in the right quantity, at the right time, at the right cost for your business.

Why does your business need supply chain management?

With the right SCM strategies, you can improve every aspect of your operations. Here are some benefits of supply chain management for small and medium businesses:

• Reduced costs: Optimised sourcing, inventory, and shipping saves money.
• Improved efficiency: Streamlined processes and better coordination lead to faster turnaround time and increased productivity.
• Increased flexibility: SCM provides agile support for changing customer demands and market dynamics.
• Better collaboration: Shared data and transparency in processes enable unified planning and rapid responses with stakeholders.
• Enhanced customer satisfaction: More accurate and faster fulfilment for consumers increases brand reputation and loyalty.
• Risk mitigation: Proactive SCM strategies make your business more resilient to disruptions.
• Competitive advantage: Smooth supply chain operations boost profitability, drive growth, and build brand value.

Major elements of supply chain management for small and medium-sized enterprises

As an evolving business, you should focus on creating flexible, agile, and responsive supply chains. Here are some ideas on areas to prioritise:

1. Planning and forecasting

   • Focus on core customers: Understand their needs and predict demand based on real data, not just intuition.
   • Agile planning: Be flexible and adaptable to adjust to changing market trends or disruptions.
   • Leverage technology: Use simple supply chain forecasting tools and demand planning software to stay ahead.

2. Sourcing and procurement

   • Build strong relationships: Partner with reliable suppliers who offer competitive prices, flexible terms, and quick adaptability to your needs.
   • Local sourcing: Consider local suppliers to reduce transportation costs and risks.
   • Consider waste reduction: Implement practices to minimise returns, expired stock, and other forms of waste in your supply chain.

3. Production and manufacturing

   • Match production to demand: Work on aligning production output with current and anticipated demand to reduce unnecessary inventory carrying costs.
   • Optimise capacity utilisation: Make the most of your existing production capacity and avoid investing in unnecessary equipment or resources.
   • Embrace short production cycles: Implement lean manufacturing practices to shorten production cycles and respond quickly to changes in customer needs.

4. Logistics and transportation

   • Plan in advance: Get peace of mind by booking shipments early, minimising any last-minute hassles and unexpected costs.
   • Explore alternative solutions: Consider multi-modal transportation options or smaller, more agile vehicles when appropriate to improve efficiency.
   • Optimise route planning: Utilise technology and data to find the most efficient and cost-effective shipping routes for your goods.

5. Inventory management and storage

   • Adjust inventory levels: Avoid costly overstocking or frustrating stockouts by optimising inventory levels based on historical data and anticipated demand.
   • Embrace lean practices: Implement Kanban systems or just-in-time (JIT) inventory to minimise storage costs and waste.
   • Ensure clear visibility: Focus on having a transparent view of stock levels and locations to make informed decisions.

6. Customer service and support

   • Prioritise communication: Maintain open interactions with customers about orders, deliveries, and potential shipping delays.
   • Invest in returns management: Streamline the returns process to minimise disruptions and retain customers.
   • Go the extra mile: Offer excellent customer service and after-sales support to build trust and loyalty.

7. Visibility and collaboration

   • Foster transparency: Integrate data from different sectors (sales, procurement, manufacturing) to create a single, transparent view of the supply chain.
   • Improve communication: Establish channels with suppliers and partners to share updates, track shipments, and collaborate on problem-solving.
   • Embrace collaborative platforms: Use cloud-based SCM software or online portals to track details, manage orders, and share information in real-time.

8. Technology and tools

   • Harness the power of data: Leverage analytics and intelligence tools to gain insights into demand patterns, identify inefficiencies, and regulate systems.
   • Embrace AI and machine learning: Use AI-powered shipment forecasting, predictive maintenance, and intelligent routing to make smarter decisions for your company.
   • Be flexible: Choose easy and accessible digital solutions that work well with your current workflows and can scale as you grow.

How to tackle challenges in the current supply chain management landscape

Today’s complex global trade networks, short product life cycles, and dynamic market conditions pose pressing challenges to shippers. But it is also the best time to bank on advancing technology to pave the way for a more responsive and resilient supply chain.

Supply chain: What’s ahead?

With the right strategy and reliable partnerships, you can turn your supply chain into a major business differentiator. Here are some steps to start streamlining your supply chain:

• Start small, focusing on improvements with the highest ROI.
• Address bottlenecks causing the biggest inefficiencies in current workflows.
• Set up transparent communication channels with your partners.
• Integrate new solutions that provide visibility, automation, and analytics.

Maersk offers tailored supply chain services to give you more control and visibility into your operations. Explore our global supply chain services.