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What exactly is Supply Chain Management?

What exactly is Supply Chain Management?

At Setlog, we offer software for Supply Chain Management. But what exactly is to be managed? What is today’s supply chain anyway?

What is the supply chain?

Basically, the supply chain encompasses the entire logistics chain, from the producer to the end customer.

In order for a product to be developed from raw materials, transported further and delivered to the retailer, who in turn forwards it to its distribution locations and finally makes it available for purchase by the end customer, a product usually has to travel long and complex routes and is accompanied by different parties. These flows of goods make up the supply chain. 

In business studies, this flow is divided into different sections.

Sections of the typical supply chain

1.The journey begins with procurement logistics, because here the raw materials that are not produced in-house and required for the end product are purchased from suppliers and then transported to a raw material warehouse.

Example: If, for example, a clothing company aims to sell new trousers, all the buttons, zippers and rivets have to be purchased first.

2.The next step is production logistics, where raw materials are transported to production sites and transformed into intermediate products. These, in turn, are stored in intermediate product warehouses. Intermediate products are transformed and stored in intermediate product warehouses until they have reached the “end product” status, which is then stored in the end product warehouse.

Buttons, zippers, rivets and all other necessary raw materials and individual parts are thus combined in several production steps until the end products, the desired trousers, are produced.

3.As part of outbound logistics, end products are then placed in external warehouses and made available for sale to the end consumer in online shops as well as at wholesalers and retailers.

The finished trousers therefore still have to travel quite a while to reach the clothing company so the company can distribute the trousers themselves or via third parties.

In addition, logistics of disposal, which deals with the disposal and recycling of waste and residues, also plays a major role.

The difference between the supply chain and logistics

While logistics often means only the activities of a company for the distribution of goods, the supply chain also includes all steps of the manufacture and procurement of a product. Plus, supply chain management also includes coordinating and planning the activities of individual companies as partners in a network.

This means that the supply chain includes logistics, but means much more, from the creation of a product to its marketing and financing.

The supply chain thus represents a complex network of supply and demand, typically including suppliers, freight forwarders, retailers and wholesalers as well as end customers and every party involved in the logistics of disposal.

What is Supply Chain Management?

Does the clothing company produce the trousers itself or does it place an order to have them manufactured?  Does it provide the external warehouses itself or do these belong to the freight forwarder? Goods are often produced in Asia but distributed around the world – are they to be transported by ship or by plane? Who pays for this? Who organizes it? The clothing company or the manufacturing company? The forwarder?

For a dynamic and complicated network of suppliers, producers and customers like this, coordination is imperative. This is exactly what supply chain management provides.

Supply chain managers deal with the supply network of their company, usually including every party from the supplier to the end consumer. This includes planning and management of all activities concerning financing, procurement and implementation as well as coordination and collaboration with partners within the network (based on the definition of the CSCMP). Meanwhile, the supply chain should of course also be optimized. Because: A good supply chain management offers a clear competitive advantage.

For an effective supply chain, numerous decisions have to be made, forwarders and suppliers have to be selected and warehouses have to be provided. It is particularly important to define financing models and responsibilities for all partners.

For example, the Incoterms, voluntary standards for contract forms in international merchandise trade, which control the assumption of costs and thus the power of disposal, help to do this. Another important function of the Incoterms is the regulation of the transfer of perils. Here it is clearly regulated from when which partner is liable for possible losses or damages.

But these alone are not enough. Companies themselves must have and maintain an overview of their expenses, the status of their orders and their cooperation with their partners. Not only to make optimized decisions, but also to directly realize incidents within their supply chain and to react effectively. So, what can efficient supply chain management look like today?

Modern Supply Chain Management?

We at Setlog are not supply chain managers, but our job is to make the work of supply chain managers as simple and clearly laid out as possible. And what is the fastest way to do this today, which is accessible from everywhere and always adaptable? – A digital solution.

That’s why our answer to the question of a clear coordination of the supply chain that adapts immediately to changes and is easily accessible globally in a central database is our supply chain management software OSCA®.

Maintaining planning, tracking and coordination of the supply chain only through Excel spreadsheets, Word documents, faxes, phone calls and endless email correspondence in the digital age is clearly outdated and inefficient. Anyone who does this will soon be left behind by competitors with fast and flexible digital alternatives.

Customer expectations are rising. Regular, fast deliveries of new and flawless products from all over the world are requested. If you want to meet these demands, you have to structure your flow of goods clearly, keep an eye on updates at all times and have a good overview of disruptions and problems.

Supply chain management software does just that. Developments within the supply chain can be displayed in real time and planning and communication take place on a single central platform that can be accessed by all parties worldwide.

Through close cooperation, the software can be adapted precisely to the needs of the customer company and its supply chain. The software always remains up-to-date and effective through support and assistance in the form of bug fixes and updates.

The result is modern, future-oriented and effective supply chain management.