Supply Chain and Supply Chain Management: A Key Role in Companies

The proper management of the Supply Chain, commonly translated as Supply Chain Management (SCM), represents a fundamental role within any company. Let’s see, however, what is actually meant and what are the pillars that compose it, the actors involved, and the advantages of optimal management.

Supply Chain and Supply Chain Management: What Is It?

The supply chain refers to all activities involved up to the delivery of the product or provision of a service to the end customer. This therefore includes the procurement of raw materials and semi-finished products, production, storage, and distribution. By embracing such a wide spectrum of activities, it is implicit that the actors involved are numerous: suppliers, manufacturers, transporters, and customers. Between these key actors, various intermediaries can be positioned who, despite the goal being the optimization of the chain, increasingly increase its complexity.

Supply Chain Management, on the other hand, is the science that deals with managing the complex network of activities just described. It therefore includes all those strategic, tactical, and operational choices to plan the network and ensure that the creation of the final product (or provision of the service) can take place in the most effective and efficient way possible. Choices that see the so-called Supply Chain Manager as the protagonist. To make the reasons why SCM is fundamental even more explicit, one can think of some advantages of its correct application (only a few are listed here):

• avoiding disruptions in the supply chain;
• increasing the level of service to the end customer, through the elimination of waste and the reduction of all those activities that are necessary but not value-added;
• reducing costs;
• increasing the environmental sustainability index;
• having greater competitiveness on the market.

By including a high number of activities, it is not difficult to imagine that the literature on the subject is truly significant. It ranges from material planning methods, such as Push or Pull logic, to transport routing optimization algorithms, in order to reduce costs and CO2 emissions.

It is therefore clear that optimal Supply Chain management is a fundamental element for the success of businesses. This is the reason why terms such as optimization, efficiency, service level, and cost reduction are very often associated with the term SCM.

The 4 Pillars in Supply Chain Management

1. Supply Chain Planning

The first step, even before purchasing the material, concerns planning. Understanding what to procure, in what timeframe, and in what quantities, is one of the key inputs for optimizing the entire downstream Supply Chain. Careful planning allows for the use of only and exclusively the necessary resources, when necessary (thus allowing to avoid stockouts or excess stock). One of the core themes of Lean Production is, in fact, producing only what the customer asks for. This goal can be achieved through the implementation of numerous planning management (and subsequently production) techniques.

2. Purchasing in the Supply Chain

This involves grounding what was defined in the previous point. Optimal management of the purchasing department means choosing reliable suppliers and competitive prices. Achieving these two fundamental goals translates into: quality, correct lead times, savings, and profit. The research and selection of reliable suppliers is the first step to having a solid and competitive Purchasing Department. Some of the considerations to make when evaluating a supplier are the analysis of its production capacity (not only in the short term), financial stability, and past performance. The second step is then contract negotiation. In this context, it is not correct to think only of the mere selling price of the product, but also of quality and performance clauses, penalties in case of non-compliance, and flexible payment terms.

3. Logistics

Logistics is a cross-cutting pillar to all SCM: its objectives are how to get raw materials and/or semi-finished products to the manufacturer, warehouse management, and the distribution of the final product to the customer. Being an activity that by its nature is configured as non-value-added but necessary, it is evident that work must be done to optimize it to the maximum and make it as effective and efficient as possible. It is precisely within this pillar that the science defined as “operations research” finds much room for application. In fact, there are numerous algorithms and mathematical models to optimize warehouses and distribution.

4. Quality

A critical but very often overlooked aspect concerns the compliant quality of the products made. Failure to comply with quality standards hides enormous costs, sometimes even very difficult to quantify, which could be drastically reduced by investing correctly in preventive activities. When talking about quality, however, it is not correct to think only of the final product inspection; quality in a broader sense also refers to the traceability and monitoring of the entire production cycle, which allows for the entire process to be under control. At the same time, the management of customer claims is also a very important topic: in addition to providing a service to the customer, this is fundamental for tracing the causes and eliminating problems at the root.

The Actors Involved in Supply Chain Management

After analyzing the areas of intervention, let’s understand who operates within Supply Chain management:

• Suppliers. Those who provide raw materials, semi-finished products, and services to the manufacturing company. They are, in fact, one of the main protagonists of the Purchasing area.
• Manufacturers. Those who transform raw materials and semi-finished products into finished products. This is where the planning, purchasing, logistics, and quality departments fall.
• Transporters and logistics providers. Those who provide transport and storage services on behalf of suppliers or manufacturers.

It is clearly implicit that the synergy between each of the actors listed above is a fundamental element for having a properly integrated Supply Chain.

In conclusion, Supply Chain Management is a topic of crucial importance and high management complexity: there are various actors and very broad areas of intervention. Supply Chain Management makes use of advanced management techniques that require specific backgrounds to be implemented.

It is a topic that is assuming more and more importance as the years go by. The events characterizing the world we live in and an increasingly demanding market are leading companies to invest more and more in this complex science which, if managed and implemented optimally, translates into reduction of purchasing costs, reduction of tied-up capital, no production downtime, and a high level of end-customer satisfaction.

Supply Chain Management: Makeitalia’s Core Business

At Makeitalia, we have been dealing with Supply Chain Management and managing companies’ Supply Chains optimally for over 15 years.
We do this through a method that aims for concreteness, excellence, innovation, and continuous listening.
We concretely support our customers in various areas of the Supply Chain, such as purchasing, logistics, planning, transport, and quality.

If you need to create a project for a successful Supply Chain and optimize your supply chain, contact us and we will find the tailor-made solution for your company.
You can do so through the form at the following Contact link.
We will be happy to listen to your needs and introduce you to our company.