Festive period is a season of high sales! People buy at a record rate to celebrate the New Year. Statista, a global data and business intelligence platform, forecasted that retail sales during the Christmas period of year 2023 in Britain alone could amount to 84.9 billion pounds sterling. For two weeks unending, people will buy anything they need and it is the duty of sellers to have them!
A company creates a network of suppliers (“distributors” in the chain) that move the product along from the suppliers of raw materials to organisations that deal directly with users. Supply chain management (SCM) is the process of managing the flow of goods and services to and from a business, including every step involved in turning raw materials and components into final products and getting them to the ultimate customer. Effective SCM can help streamline a company’s activities to eliminate waste, maximise customer value, and gain a competitive advantage in the marketplace.
A market survey was conducted on the challenges of supply chain management in Nigeria and 673 supply chain practitioners responded. Eighteen percent (18%) stated that ‘inventory management’ is the major challenge of supply chain management, 11 percent stated it was ‘distribution optimisation’, 14 percent stated it was ‘supplier collaboration’, 39 percent stated it was ‘demand forecasting’; and 18 percent stated it was ‘transportation and logistics’ due to bad roads and inadequate warehouses.
Inventory management, a critical element of the supply chain, is the tracking of inventory from manufacturers to warehouses and from these facilities to a point of sale. The goal of inventory management is to have the right products in the right place at the right time. Demand forecasting is used to predict what customers’ demand will be for a product or services, with varying levels of specificity. Distribution optimisation minimises a given distribution error by utilising an evolutionary distribution algorithm (network).
For effective application of supply chain management in business, most experts and purchasing and supply practitioners refer to the following five critical components of supply chain management:
(1) Planning: Plan and manage all resources required to meet customers’ demand for a company’s product or service. When the supply chain is established, determine metrics to measure whether the supply chain is efficient, effective, delivers value to customers and meets company goals.
(2) Sourcing: Choose reliable suppliers to provide the goods and services needed to create the product. Then, establish processes to monitor and manage supplier relationships. The key processes of sourcing include: ordering, receiving, managing inventory and authorising supplier payments.
(3) Manufacturing: Organise the activities required to accept raw materials, manufacture the product, test for quality, package for shipping and schedule for delivery.
(4) Delivery and logistics: Coordinate customer orders, schedule deliveries, dispatch loads, invoice customers and receive payments.
(5) Returning: Create a network or process to take back defective, excess or unwanted products.
Supply chain management is important because:
Effective supply chain management systems minimise cost, waste and time in the production cycle. The industry standard has become a just-in-time supply chain where retail sales automatically signal replenishment orders to manufacturers. Retail shelves can then be restocked almost as quickly as the product is sold. One way to further improve on this process is to analyse the data from supply chain partners to see where further improvements can be made.
By analysing partner data, CIO.com identifies three scenarios where effective supply chain management increases value to the supply chain cycle:
(1) Identifying potential problems. When a customer orders more product than the manufacturer can deliver, the buyer can complain of poor service. Through data analysis, manufacturers may be able to anticipate the shortage before the buyer is disappointed.
(2) Optimising price dynamically. Seasonal products have a limited shelf life. At the end of the season, these products are typically scrapped or sold at deep discounts. Airlines, hotels, cinemas and others with perishable or short shelf-life “products” typically adjust prices dynamically to meet demand and push their products off the shelves. By using analytic software, similar forecasting techniques can improve margins, even for hard goods.
(3) Improving the allocation of “available to promise” inventory: Analytical software tools help to dynamically allocate resources and schedule work based on the sales forecast, actual orders and promised delivery of raw materials. Manufacturers can confirm a product delivery date when the order is placed – significantly reducing incorrectly-filled orders.
Key features of effective supply chain management
The supply chain is the most obvious “face” of any business for customers and consumers. The better and more effective a company’s supply chain management is, the better it protects its business reputation and long-term sustainability.
IDC’s Simon Ellis in “The Path to a Thinking Supply Chain” defined supply chain management by identifying the five “Cs” of the effective supply chain management of the future:
(1) Connected: Being able to access unstructured data from social media, structured data from the Internet of Things (IoT) and more traditional data sets available through traditional ERP (enterprise resource planning) and B2B (business to business) integration tools.
(2) Collaborative: Improving collaboration with suppliers increasingly means the use of cloud-based commerce networks to enable multi-enterprise collaboration and engagement.
(3) Cyber-aware: The supply chain must harden its systems and protect them from cyber-intrusions and hacks, which should be an enterprise-wide concern.
(4) Cognitively enabled: The AI platform becomes the modern supply chain’s control tower by collating, coordinating and conducting decisions and actions across the chain. Most of the supply chain is automated and self-learning.
(5) Comprehensive: Analytics capabilities must be scaled with data in real time. Insights will be comprehensive and fast. Dormancy is unacceptable in the supply chain of the future.
Many supply chains have begun this process, with participation in cloud-based commerce networks at an all-time high and major efforts are underway to bolster analytics capabilities.
How supply chain management evolved
While yesterday’s supply chains were focused on the availability, movement and cost of physical assets, today’s supply chains are about the management of data, services and products bundled into solutions. Modern supply chain management systems are about much more than just where and when. Supply chain management affects product and service quality, delivery, costs, customer experience and ultimately, profitability.
As recently as 2019, a typical supply chain expert accessed 50 times more data than just five years earlier. However, less than a quarter of this data is being analysed. That means the value of critical, time-sensitive data – such as information about weather, sudden labour shortage, political unrest and micro-bursts in demand – can be lost. Modern supply chains take advantage of massive amounts of data generated by the chain process and are evaluated by analytical experts and data scientists. Future supply chain leaders and the Enterprise Resource Planning (ERP) systems they manage will likely focus on optimising the usefulness of this data – analysing it in real time with minimal delay.
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