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Supply Chain Management Explained | 2024

Supply Chain Management Explained | 2024

Supply Chain management has been a significant part of my journey for the past 25 years. Over this period, I have led one of Germany's largest supply chain consultancies with more than 300 consultants and over 1,000 successful projects in procurement and supply chain management. In this article, I will explain everything you need to know about supply chain management. Let’s dive in.

What is Supply Chain Management?

Many people often confuse supply chain management (SCM) with logistics, assuming they are the same. However, logistics is only a part of SCM. SCM encompasses six key components:

  1. Procurement: This involves sourcing materials, conducting inquiries-for-quote (IFQ), evaluating offers from suppliers, and finalizing contracts. Procurement ensures you have suppliers capable of meeting your demand.

  2. Demand Planning: Imagine you are manufacturing cars. Demand planning involves determining how many cars you intend to sell and assessing the quantity of each component required. For example, if each car has four seats and you aim to produce 10,000 cars, you need 40,000 seats. This total can be broken down into smaller monthly production targets.

  3. Warehousing: Managing warehousing involves storing all goods necessary for production. You may need one or several warehouses, and a warehouse manager oversees this aspect, ensuring optimal organization and management.

  4. Inventory Management: This involves maintaining a balance of parts – neither too many nor too few. Excessive inventory wastes liquidity, while insufficient inventory can halt production. The inventory manager ensures a smooth flow of materials.

  5. Logistics: Logistics is divided into incoming (raw materials, spare parts) and outgoing logistics (finished products delivered to customers). Both require meticulous coordination, even when suppliers handle part of the logistics.

  6. Customer Support: Customer support ensures that customers are informed about their product deliveries and any support they might need. For instance, in car manufacturing, it's about communication with the buyer regarding delivery timelines and conditions.

Origins of Supply Chain Management

Supply chain management was first conceptualized by Wolfgang Parch in 1979. He has shared insights into the inception and early projects of SCM in an interview, which you can find [here].

Feel free to leave any questions about supply chain, procurement, or logistics in the comments, and I might address them in a new video or article. For more such content, subscribe to my channel and turn on notifications.

Keywords

  • Supply Chain Management (SCM)
  • Logistics
  • Procurement
  • Demand Planning
  • Warehousing
  • Inventory Management
  • Customer Support
  • Wolfgang Parch

FAQ

Q1: What is the difference between supply chain management and logistics?
A1: Supply chain management encompasses a broader scope, including procurement, demand planning, warehousing, inventory management, logistics, and customer support, whereas logistics is focused solely on the transportation of goods.

Q2: What does procurement involve?
A2: Procurement involves sourcing materials, evaluating supplier offers, and finalizing contracts to ensure you have the necessary supplies that meet your production demand.

Q3: How does demand planning work in supply chain management?
A3: Demand planning entails determining the quantity of products you intend to sell and the components required for production. You then break down these needs into manageable production targets over a specific period.

Q4: What role does warehousing play in SCM?
A4: Warehousing involves storing all necessary production materials in one or more facilities, managed by a warehouse manager who ensures their proper organization and availability.

Q5: Why is inventory management important in SCM?
A5: Inventory management is crucial to avoid overstocking or understocking parts. Overstocking ties up funds unnecessarily, while understocking can halt production.

Q6: What does logistics include in supply chain management?
A6: Logistics in SCM includes both incoming logistics (transporting raw materials and parts to the production facility) and outgoing logistics (delivering finished products to customers).

Q7: What is the significance of customer support in SCM?
A7: Customer support ensures buyers are informed about their product deliveries and receive help with any concerns, maintaining customer satisfaction.

Q8: Who invented supply chain management?
A8: Wolfgang Parch is credited with inventing supply chain management in 1979.

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