What is Supply Chain Management?

Written By: Eric Kimberling
Date: November 6, 2021

Supply chain management is one of the most important functions within many organizations, but what exactly is it and why is it so relevant in today’s economy?

Let’s find out…

I was working with Samsonite, the luggage company, and at the time they had operations throughout the world. They had manufacturing and distribution in North America, Europe, and Asia, and retail outlets in Asia and Europe.

One of the first things I had to do as part of that project was to go visit much of Samsonite's supply chain. The whole idea was to assess and analyze how the supply chain was working and where the opportunities for improvement were, and how they might be able to use technology to automate much of their supply chain.

As part of that project, I was able to travel the world and go to many parts of Europe and several countries in Asia Pacific. I learned a lot about supply chain management, and that was a pivotal point in my career. I became fascinated with supply chain management. I had always worked in manufacturing and energy types of organizations leading up to that. But that was my first real exposure to a complex global supply chain.

Defining Supply Chain Management

In its simplest terms, supply chain management is the way that companies get raw materials to the place where it can be produced into a finished good to ultimately get to the customer.

When you think about a global supply chain, which is the case for most organizations, you have a lot of different vendors that are involved. As well as various information and types of things that need to flow throughout that supply chain. It typically all begins with identifying and sourcing raw materials.

Once you source the raw materials, you've got to get it to wherever you're going to manufacture the product. Once the product's been manufactured, you've got to get it to a warehouse. Hers is where you've got to figure out how to get it to your end customer, whether that's a retailer or a direct end customer. There's a lot that goes into all those processes, but that's the general definition of what supply chain management is.

Now, supply chains are particularly important for manufacturing and retail organizations that deal with high volumes of inventory along with e-commerce types of organizations that are selling products online. When you look at companies like Amazon or Walmart or Alibaba, those companies are examples of organizations that have very complex supply chains. Those three examples of those companies I gave you are very good at managing their supply chains.

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3 Reasons Why Supply Chain Management Is Important

Supply Chain Management is critical to all types of organizations for several different reasons.

First, and foremost, your ability to manage your supply chain effectively ultimately impacts your customers. Your ability to forecast and anticipate what your customer needs are, and ultimately being able to deliver to your customers in a timely fashion is critical, and it's up to your supply chain management and capability to ensure that that happens.

The second reason why supply chain management is so important is because, for many organizations, your supply chain is where a lot of cost resides. There's a lot of cost in your inventory, in freight and transportation, and moving your inventory around. Manufacturing facilities and product warehousing, takes a great deal of time and money. Looking at your overall cost and really finding ways to decrease your cost and maximize your supply chain is what you should always be looking for.

The third and final reason why supply chain management is so important is because supply chains today are very complex. Ever since the globalization wave started 20 - 30 years ago, when companies started shifting production overseas, that added a layer of complexity to managing a supply chain. The global and intertwined nature of today's global supply chains is a significant reason why supply chain management is so important.

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Risk and Pitfalls

Managing and changing a supply chain is fraught with risks and pitfalls. There's a lot of complexity and risk that goes into managing your supply chain, and it's not just your day-to-day management in terms of tracking where your vendors are and redistributing where you source your materials from.

Those are all complex things to manage, but when you go to automate or change your business processes or the way that your employees in your supply chain are operating, there's a lot of intricacy and risk that emerges.

To simplify, any sort of change management in an organization is going to be challenging. This is just a change that's already going to be magnified because now you're dealing with a y multifaceted set of business processes within your supply chain.

The reason why supply chain management is risky and has so many pitfalls is because oftentimes organizations are trying to consolidate cultures, diverse business processes, and siloed operations within multiple countries or potentially hundreds of different vendors, warehouse locations, and manufacturing facilities.

Managing all that complexity and the diverse nature of it, and even the cultural nuances of the different employees makes supply chain management very arduous.

Common Supply Chain Management Systems

The good news for organizations that are looking to improve their supply chain management functions and capabilities is that there's a lot of great systems out there and technologies that can help automate and optimize business operations. These systems are designed to address some of the complexities, diversities, and risks that we've talked about.

Some examples of technologies that can enable a better supply chain management function within your business are going to be traditional ERP systems. Systems like SAP S/4HANA, Infor, and Oracle, all have strong supply chain management capabilities. These are all flagship ERP products out there in the marketplace that handles the supply chain particularly well.

In addition to those ERP or enterprise resource planning types of vendors that provide supply chain management capabilities, you also have more focused best-of-breed supply chain management systems, or in other words, technologies that specialize only in supply chain management. Examples of companies that handle that type of specialty and focus are going to be systems like Blue Yonder, Manhattan Associates, and HighJump.

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Resources

if you want to learn more about some of the leading supply chain management and ERP systems in the marketplace, I highly encourage you to download our 2021 Digital Transformation Report. This report includes independent agnostic rankings and comparisons of different supply chain management systems, as well as other best practices that will help you through your supply chain management transformation.

If you're experiencing supply chain disruptions or challenges in our current climate, please don’t hesitate to reach out to me directly. I am happy to be an informal sounding board as you move through your digital transformation journey.

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Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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