What is an example of supply chain management?

Supply chains have existed since ancient times, beginning with the very first product or service created and sold. With the advent of industrialization, SCM became more sophisticated, allowing companies to do a more efficient job of producing and delivering goods and services. For example, Henry Ford’s standardization of automobile parts was a game-changer that allowed for the mass production of goods to meet the demands of a growing customer base. Over time, incremental changes (such as the invention of computers) have brought additional levels of sophistication to SCM systems. However, for generations, SCM essentially remained a linear, siloed function that was managed by supply chain specialists.

The internet, technology innovation, and the explosion of the demand-driven global economy has changed all that. Today’s supply chain is no longer a linear entity. Rather, it’s a complex collection of disparate networks that can be accessed 24 hours a day. At the center of these networks are consumers expecting their orders to be fulfilled―when they want them, the way they want them.

We now live in a time of unprecedented global business and trade, not to mention continual technology innovation and rapidly changing customer expectations. Today’s best supply chain strategies call for a demand-driven operating model that can successfully bring people, processes, and technology together around integrated capabilities to deliver goods and services with extraordinary speed and accuracy.

Though SCM has always been an enterprise fundamental, the supply chain today is more vital than ever as a marker for business success. Companies that can effectively manage their supply chain to adapt to today’s volatile and ever-changing, technology-driven business environment are the ones that will survive and thrive.

Plan and manage all resources required to meet customer 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.

Sourcing

Choose suppliers to provide the goods and services needed to create the product. Then, establish processes to monitor and manage supplier relationships. Key processes include: ordering, receiving, managing inventory and authorizing supplier payments.

Manufacturing

Organize the activities required to accept raw materials, manufacture the product, test for quality, package for shipping and schedule for delivery.

Delivery and Logistics

Coordinate customer orders, schedule deliveries, dispatch loads, invoice customers and receive payments.

Returning

Create a network or process to take back defective, excess or unwanted products.

Why is supply chain management important?

Effective supply chain management systems minimize 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 product is sold. One way to further improve on this process is to analyze the data from supply chain partners to see where further improvements can be made.

By analyzing partner data, the CIO.com post identifies three scenarios where effective supply chain management increases value to the supply chain cycle:

• 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.
  
  
• Optimizing 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 and others with perishable “products” typically adjust prices dynamically to meet demand. By using analytic software, similar forecasting techniques can improve margins, even for hard goods.
  
  
• 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 the 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 Chain¹ defines what is supply chain management by identifying the five “Cs” of the effective supply chain management of the future:

• 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 and B2B integration tools.
  
  
• Collaborative: Improving collaboration with suppliers increasingly means the use of cloud-based commerce networks to enable multi-enterprise collaboration and engagement.
  
  
• Cyber-aware: The supply chain must harden its systems and protect them from cyber-intrusions and hacks, which should be an enterprise-wide concern.
  
  
• 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.
  
  
• Comprehensive: Analytics capabilities must be scaled with data in real time. Insights will be comprehensive and fast. Latency 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 underway to bolster analytics capabilities.

Evolution of supply chain management

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 2017, a typical supply chain accessed 50 times more data than just five years earlier. However, less than a quarter of this data is being analyzed.  That means the value of critical, time-sensitive data — such as information about weather, sudden labor shortages, political unrest and microbursts in demand — can be lost.

Modern supply chains take advantage of massive amounts of data generated by the chain process and are curated by analytical experts and data scientists. Future supply chain leaders and the Enterprise Resource Planning (ERP) systems they manage will likely focus on optimizing the usefulness of this data — analyzing it in real time with minimal latency.

Supply chain consulting

With IBM Services, you can evolve your supply chain processes into intelligent workflows, to reach new levels of responsiveness and innovation. Challenge siloed processes to uncover efficiencies, enable your teams to execute and deliver, and use emerging technologies like AI and blockchain to unlock opportunities in every step of the value chain — from demand planning to order orchestration and fulfilment.

Supply chain management use cases

Chemonics

Chemonics and IBM co-created a first-of-its-kind platform called Automatic Requisition Tracking Management Information System (ARTMIS). The ARTMIS platform helps track shipments at every step of the supply chain. This has allowed Chemonics to manage orders up to 24 months out.

BASF

BASF wanted to make digitalization an integral part of its business to create additional value for customers, grow the business and improve efficiency. Working with IBM, the company’s Nutrition and Health division conducted a proof of concept (PoC) with IBM® Watson™ technology to explore how AI and machine learning can support smarter inventory decisions, helping to ensure that products arrive in the right place at the right time.

Farmer Connect

Learn how Farmer Connect and IBM Food Trust™ are connecting coffee growers and consumers with blockchain.

Explore supply chain topics

Supply chain control tower

A supply chain control tower should provide end-to-end visibility across the supply chain — particularly into unforeseen external events.

Order management

The tracking of orders from inception to fulfillment and managing the people, processes and data connected to the order as it moves through its lifecycle.

Inventory management

Clear visibility into inventory transactions can positively impact the entire process of ordering, storing and using inventory — from raw materials to finished product.

Electronic data interchange

EDI is a standard format to exchange business information between two organizations electronically instead of using paper documents.

Supply chain analytics

Analytics that can affect quality, delivery, the customer experience — and ultimately, profitability.

Supply chain optimization

Supply chain optimization makes the best use of technology and resources like blockchain, AI and IoT to improve efficiency and performance in a supply network.

Blockchain supply chain

Enhance trust across your supply chain network with the business and technical expertise of IBM Blockchain.

B2B integration

Business-to-business (B2B) integration is the automation of business processes and communication between two or more organizations.

Managed file transfer

Managed file transfer (MFT) is a technology platform that allows organizations to reliably exchange electronic data between systems and people in a secure way to meet compliance needs.

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