What Is Supply Chain Management?

Bet you didn't realize when you were running a lemonade stand as a kid that you were learning a lesson in supply chain management?

Controlling all the components involved in that classic childhood business endeavor was a microcosm of today's complex supply chain networks

Identifying suppliers.

Procuring raw materials.

Assembling your final product.

Storing your product until you're ready to sell it.

Transporting your product to your distribution center.

Putting your lemony goodness in the hands of consumers.

Depending on how much a younger sibling might have interfered, it was a fairly simple process. Your goal, however, was the same as it is for any supply chain giant like Amazon or Walmart today: to have your product ready when customers wanted it.

What's different is that today's supply chain professionals who are technically competent and strategically minded can command salaries that would stun any 8-year-old lemonade stand manager.

And that's one excellent reason you might want to consider an online MBA in supply chain global integration management and a career in supply chain management.

Definition of a supply chain

Dr. Chuck Oden, assistant professor of management in Saint Leo University's Donald R. Tapia School of Business and an APICS Certified Supply Chain Professional (CSCP) offers this definition of a supply chain.

"A supply chain is every step that is taken and every company or organization that contributes to the design, assembly and delivery of a product or service. It's the network that gets goods and services from a supplier to a customer."

According to Dr. Oden, supply chain stakeholders include raw materials suppliers, manufacturers, wholesalers, retailers, transportation companies, brokerage houses, third-party logistics companies, and fourth-party logistics companies, and government entities.

"And in today's global marketplace, any of those components can be located anywhere in the world."

The definition of a supply chain goes well beyond the flow of materials alone, adds Dr. Oden. It includes the flow of information and finances.

A typical example for each of these flows could be:

Materials Flow:

1. One of many global suppliers
2. Manufacturing
3. Warehouse
4. Logistics
5. Consumer
6. Returned items

Information Flow:

1. Consumer
2. Sales and Product Development
3. Procurement
4. Manufacturing
5. Warehousing
6. Logistics
7. Consumer

Finances Flow:

1. Shareholders
2. Procurement
3. Manufacturing
4. Warehousing
5. Logistics
6. Consumer
7. Shareholders

Steps in a typical supply chain management process

The typical steps in a supply chain process are:

1. Shareholders
2. Sales and Product Development
3. Procurement
4. Suppliers
5. Manufacturing
6. Warehouse
7. Logistics
8. Consumers

How do all these steps fit together? Dr. Oden explains.

• Shareholders

There is growing awareness of the shareholder value the supply chain can bring to organizations. Shareholders provide initial and continuing investments with expectations of a return slightly better than other available options.

• Sales and Product Development

Supply chains are both internal and external to an organization. Before an organization can radically improve its external chain, it must first look at its internal flow.

The Sales & Operations Planning (S&OP) process, in many cases, forces the organization to see its level of disconnects. Does the organization share the same information system throughout or does each department have duplicate and disparate data upon which it operates? Upon what information are sales forecasts determined? How are the sales forecasts operationalized throughout the organization? How does the organization prevent the bull-whip effect resulting in out-of-stock or excess inventory? 

Ideally, the sales forecast should begin the process. These numbers should guide operations through procurement, manufacturing, and production, which then lead the logistics and warehouse operations.

Sales and product development must be aware of the market to be able to forecast customer needs and desires. This can more readily be accomplished through establishing relationships with key customers and the use of Customer Relationship Management (CRM) software. This helps an organization to know who are its key customers, their habits and desires. Having sales and product development as the first step may help to keep the organization customer focused.

• Procurement and Suppliers

Once the sales team is able to determine a forecast, then procurement can work with key suppliers for needed materials. Ideally the organization utilizes Supplier Relationship Management (SRM) software to help it track performance and determine who its key suppliers are.

Through cooperative relationships, both organizations can attempt to reduce costs, build better products, and provide a better quality product to the consumer. Whether these relationships are competitive or cooperative, they must be continuously cultivated and monitored. 

• Manufacturing

If the required supplies are present, then manufacturing can begin. At this point, warehousing and logistics are also involved in getting the supplies to the manufacturer, storing items before, during, or after production, or delivering products to the customer upon completion.

• Warehouse

Some items are manufactured to go into stock in the warehouse and others are made for immediate delivery to the customer. Lean Six Sigma is heavily involved in reducing waste throughout this process and also in standardizing processes and ensuring quality. 

• Logistics

Logistics works with Sales to determine the best packaging, presentation, and delivery method of the product. The goal is to have the right product, with the right packaging and documentation, at the right place, at the right time. If it is one of 8 percent of products that is returned, then the organization works through entirely separate processes to evaluate the product, determine its destination, and if needed return it to either the producer or the initial supplier. Some items are discarded; others are repaired and sold on a secondary market.

Strategic importance of supply chain management

According to Dr. Oden, even in a single-factory, single-location operation with just a few suppliers, the supply chain process is a complicated operation requiring effective communication and a supportive organizational culture.

"Many organizations operate on a global scale with numerous customer groups and suppliers. Decision-making is complex and many factors must be considered, requiring supply chain personnel to be both innovators and leaders in their organizations."

Over the last few years, forward-thinking businesses have realized that their supply chains can provide a significant strategic advantage.

"At the same time – with the continued rise of global procurement and operations and an increased focus on customer and supplier needs and supply chain customization – supply chains have never been more complex than they are today," he says.

Supply chain management involves integrating global sourcing, global expansion and global partners into the organization's strategy. It involves working with first-party through fourth-party service providers, suppliers, customers and intermediaries. And growing emphasis is being placed on just-in-time inventory, reduced product lifecycles, outsourcing and supplier consolidation – all of which raise risks for global supply chains.

Careers in supply chain management

These industry trends and recognition of the impact that supply chain management can have on an organization's bottom line is the reason why supply chain-related positions continue to command some of the highest salaries across all industries.

"A strong industry growth rate and demand for supply chain professionals and their specific skills have led to salaries which have increased to levels over $100,000," says Dr. Oden.

Of course, those salaries are for supply chain professionals with years of experience. A career in supply chain management can start in just about any industry – from manufacturing to healthcare to government agencies – and in any number of entry-level positions. A few common ones are:

• Planner/Analyst: Analyze data to understand, predict and enhance an organization's supply chain processes. Use analytical and quantitative methods to make recommendations to improve performance and identify potential problems.

• Buyer/Purchasing Agent: Works with internal departments to purchase products and services for the organization to use or resell. Evaluates suppliers, negotiates contracts, reviews quality of products. Could lead to a job as a purchasing manager, who oversees the entire purchasing process.

• Inventory Specialist: Responsible for inventory quality and accuracy. Develops plans to optimize inventory costs and customer service. Coordinates inventory counts and monitors flow. Could lead to an operations manager position.

• Transportation Coordinator/Traffic Analyst: Evaluates, selects and manages transportation carriers to ensure on-time deliveries. Could lead to a position as a fleet manager who optimizes efficiencies for an organization's entire fleet operations.

• Production coordinator: Oversee daily operations of manufacturing and related plants. Coordinate, plan and direct production schedules and forecast future production needs.

A bright future in supply chain management

"The demand for technically competent managers capable of rigorous analytics, forecasting, planning and operational efficiencies is greater than the current supply, according to Dr. Oden.

Organizations are looking for supply chain professionals who can address global sourcing and logistics issues, standardize efficiency and effectiveness, display enhanced decision-making capabilities and project planning skills, and can improve customer and supplier relationships.

This need exists not only in manufacturing. Supply chains are critical to improving quality of life – in disaster relief operations, medical missions, and environmental concerns.

"Career and pay opportunities are increasing significantly for people who are capable of establishing a best-in-class supply chain within their companies," says Dr. Oden. "For people who have the right aptitude and the appropriate training, the supply chain management field is ripe with opportunity."

Sources:

Council of Supply Chain Management Professionals

Bureau of Labor Statistics Occupational Outlook

Image credits: HurstPhoto, Monkey Business Images, wavebreakmedia, stock photo mania on Shutterstock and Creative Influence