Supply chain management is the integrated process-oriented planning and control of the flow of goods, information and money across the entire value and supply chain from the customer to the raw material supplier. Retail companies become involved in supply chain management to control product quality, inventory levels, timing, and expenses. In a global economy, supply chain management often includes dealings with companies and individual contributors in other countries, which requires involvement in politics, trade and tariff laws, quality control, and international relationships.
Examples of supply chain activities include farming, refining, design, manufacturing, packaging, and transportation. Because global supply chains are both logistically and technologically complicated, there are now global supply chain management specialists and firms who oversee the process for many different retail companies. As consuming trends increasingly move towards digital purchases shipped from a central warehouse facility directly to the consumer, the largest retail companies are going to be increasingly involved with supply chain management and logistics.
These are the 10 Best Practices that companies in the retail industry (and any industry) need to ensure that their supply chain management is as effective as possible and contributing as much as possible to the company\'s bottom line.
- Identify supply chain stakeholders and establish a committee to engage stakeholders in supply chain issues and establish a workgroup comprised of departments.
- Make sure the supply chain itself has appropriate staffing.
- Technology is your friend.
- Establish synergistic relationships with key suppliers.
- Engage in collaborative strategic sourcing.
- Don't just consider price when making supply chain decisions. Consider the \"total cost of ownership.\"
- Supply chain leaders should have some contribution and control with contracts.
- Inventory optimization is essential.
- Establish appropriate controls throughout the supply chain system to minimize risk.
- Keep the supply chain sustainable with social responsibility and green initiatives.
To increase profitability, companies used to divide the various work steps between their employees. Today, global organizations divide the various tasks in the value chain amongst each other. The sub-products travel gigantic distances. Nevertheless, the companies can manufacture more quickly and more cheaply than a single company could. In this way, integrated planning can open up new markets. However, the companies become dependent on each other. These business relationships require closer cooperation and a more intensive exchange of information.
Previously used as a synonym, supply chain management, in contrast to logistics, goes beyond the confines of a company. Both supply chain management and logistics deal with the organization of object flows along the process stages of the supply chain. Both are aimed at increasing customer benefits (effectiveness) and system-wide improvement of the cost-benefit ratio (efficiency). Prototype to Production
Modern supply chain management goes a step further, especially in the areas of transport and warehousing within the company. SCM explicitly includes the organization and coordination of autonomous business units within a value chain it the analysis. This accentuates the inter-organizational aspect of logistics management. SCM takes a cross-company perspective on all business processes and connects all areas of business administration, such as purchasing, production, distribution, marketing, controlling, etc. Focused on the strategic aspects of functional areas, SCM leaves tactical questions to the individual participants.
SCM ensures cross-company, process-oriented planning and control of the entire value chain. Consumers force logistics to rethink, which is why high customer expectations and short product life cycles are taken into account. Furthermore, relationships with suppliers are considered in order to optimally design and control goods deliveries, cash flows and information flows.
Functions Within Supply Chain Management:
- Customer Relationship Management: Consistent focus on end customer demand to meet the increasing customer requirements and ensures a high degree of flexibility.
- Flexibility and demand-oriented production: Continuous cost reduction and resource optimization across all stages of the value chain.
- Synchronization of supply and demand: Increasing the adaptability and development capability of the supply chain.
- Several sub-objectives can be derived from these long-term objectives:
- Inventory reduction along the value chain,
- Reduction of warehousing costs,
- Safeguarding the just-in-time supply,
- Acceleration of cash-to-cash cycles,
- Improvement of delivery reliability,
- Reduction of throughput times.
How successful supply chain management works is demonstrated by Inditex, one of the largest textile companies in the world based in Arteixo (Spain), with its fashion brand Zara. Zara\'s supply chain management expertise is confirmed by the benchmark of US market research firm Gartner, which provides an overview of the best supply chains in Europe. Fashion brands are relocating their production to China. This saves costs, but complicates the management of the supply chain. Fashion trends, in particular, are short-lived. The journey of cargo in container ships halfway around the world complicates the principle of fast fashion.
Inditex, on the other hand, purchases more than half of its products from Spain, Portugal and Morocco. The costs are higher, but shorter supply chains allow them to react more quickly to trends. Zara no longer speculates on the latest fashion. Production is suspended until it is certain what the customer is actually going to buy. The goods are sold at full price and stocks remain minimal.
Today, companies cannot guarantee competitiveness for their products and services on their own. The entire supply chain contributes to success. No longer are individual companies in competition, but entire supply chains. With the promise of a long-term win-win situation for each individual participant, companies can be persuaded to become part of a supply chain.
The rapid development in information technology has made all of this progress possible. Nevertheless, there are numerous problems along the supply chain that make successful implementation of supply chain management difficult in practice.
- Mutually exclusive goals: The companies involved in the supply chain can pursue different, sometimes mutually exclusive goals.
- Distribution of costs, risks and profits: A further hurdle is the fair distribution of cost and financing burdens or risks and the distribution of value-added shares.
- Lack of transparency of the processes: The different competence levels of the partners and the fear of the exploitation of knowledge causes a lack of transparency of the processes between the actors.
- Lack of uniform key figures: Agreement with the partner companies on internal, uniform key figures and technical transfer standards.
- Increasing dependency: Companies need to work more closely together and exchange information more intensively.
- Legal issues: What do contracts look like between partners exchanging sensitive internal company data and how are violations of the agreement punished?
- Building relationships based on partnership: How do you organize trust without being dependent on a handful of employees who maintain these relationships? Management concepts for building and maintaining such relationships are required.
Sustainability - a principle of resource consumption in which the preservation of essential properties, stability and the natural regenerative capacity of a system take top priority - is becoming a worldwide trend. The SSCM is guided by this approach. Driven by the demands of stakeholders such as the end consumer, the criteria of ecology, economy and society are derived. It is important for companies that strive to achieve the future-oriented mindset of the SSCM to pay equal attention to the three dimensions of sustainability. In contrast to conventional supply chain management, both the origin of the products and their use and disposal after sale are important.
For companies, SCM entails a change of processes and culture. Its objective is to optimize processes, increase performance characteristics, reduce costs and increase customer satisfaction. In order to be successful in supply chain management, you must meet these seven requirements:
- Interdisciplinary Cooperation: Process networking requires comprehensive cooperation. This awareness is necessary to build up the necessary know-how.
- Open Exchange of Information: Aim for an open exchange of information with all companies involved in the supply chain. Confirm unrealistic plans: The intelligent and the qualified are successful, not the stronger one.
- Fast Responsiveness: The ability to react more quickly to changes represents qualified process networking.
- Short Process Times: The relation between the production times and the process times in the upstream processes serves as an indicator for the reaction speed. While the production times amount to a few hours or days, the operative process times in upstream processes may take several days. Put these times into question.
- Powerful ERP System: The prerequisite for the required speed and dynamism within the supply chain is a qualified ERP system. The manual execution of standard processes is a thing of the past. We recommend to examine the suitability of the ERP system carefully. Establish a sustainable performance profile with IT systems to reduce complexity in logistics.
- Holistic Logistics: The integration of information, material and process logistics is not a simple task. Adjust these processes to fit into the chain and do not underestimate the impact of disturbed chain links.
- Clear and Binding Rules: A qualified supply chain can only be created if clear process rules and responsibilities are established. A discreet omission of these guidelines poses a typical vulnerability. Define clear rules and follow them.
Software solutions for the value chain are required. Companies are aiming for higher investments in software and technology in their supply chain. At the same time, the focus is shifting from pure cost reduction and resource optimization in the process chain to the needs of customers. In view of the constantly changing industry environment, choosing the right software is crucial. The software for the manufacturing industry is intended to help manufacturers find the best system.