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What is supply chain management?

Two businessmen review information on a tablet while standing in a warehouse.

Although they seem like a distinctly modern innovation, supply chains have always been around, even in ancient times. After all, when a product moves from its point of origin, to its point of distribution, to the consumer, that’s a supply chain in its simplest form. But as trade networks and shipping lanes have multiplied, the complexity of global supply chains has grown exponentially. Hence the importance of supply chain management (SCM).

Supply chain management: defined

Supply chain management refers to the planning and management of activities that are involved in the production and distribution of products or services. Covering everything from sourcing and product development to the customer experience and post-sale service, supply chain management should be economical, sustainable and enhance customer value.

Virtually every product that reaches the end consumer requires the combined efforts of several organizations. These organizations, which form the supply chain, are interlinked through physical and informational networks, whether it’s the transportation and storage of goods, or establishing long-term strategies with supply chain partners. Alan Amling, vice president of UPS Ventures, puts it like this: “Supply chain management is a catch-all term for the activities undertaken by organizations to control these networks, as well as the flow of materials, capital and information.”

What is the difference between logistics and supply chain management?

Logistics and supply chain management definitions are often used synonymously, but they’re not the same thing. In fact, logistics is a component of supply chain management. It refers to the planning and action of moving and storing products efficiently, both in forward and reverse flows, while meeting the customer’s needs. Global supply chain management is significantly more wide-ranging, as it encapsulates sourcing and procurement, manufacturing, distribution and customer service, as well as the coordination of multiple vendors and retailers. Put simply, supply chain management is about strategy, whereas logistics is more tactical.

What are the basics of supply chain management?

So, how do businesses go about implementing supply chain management? With the caveat that this depends to a large extent upon your industry, as well as the size of your company, one of the first things you need to do is develop a long-term strategy. After deciding which supply chains you’re competing in and mapping the physical and information flows that make up these supply chains, it’s easier to discover areas where efficiencies and value gains can be made.

For businesses that are just getting started with best practice strategic supply chain management, UPS has several tools and solutions to explore. Supply chain design and planning services can help you get the best out of your organizational infrastructure, while there’s also a wide range of transportation management, distribution and supplier management tools that you can use to gain control over your supply chains.

What are the benefits of supply chain management?

Implementing a modern strategic supply chain management system can have many positive effects. According to Amling, “One of the most important benefits of supply chain management is its capacity to help control and lower operational costs while meeting the increasing demands of information-empowered businesses and consumers.”

Utilizing supply chain management software can also increase your organizational agility and help you adapt faster and more dynamically to fluctuating markets. Increased visibility—where you can find out where every element of a global supply chain is at any given moment—can help you to improve forecasting and decision-making, as well as allay risks such as logistical errors, production line hold-ups or late shipments. Finally, strategic supply chain management can help to improve internal cooperation and communication within your business.

Why is supply chain management important for growing businesses?

Supply chain management can be a useful tool for all growing businesses, not just large, multinational corporations. In fact, the supply chain can be a crucial factor for growth, with a Deloitte study revealing that 79 percent of companies with superior supply chain capabilities report above average revenue growth. The reduction of inventory and logistics costs and improvement of market share through the implementation of a streamlined supply chain can be added benefits for fledgling businesses looking to achieve growth through supply chain optimization.

What is the role of supply chain management in e-commerce?

With online shoppers expecting products to arrive faster than ever before and competition at an all-time high, efficient supply chain management is crucial for online businesses. As Amling says, “When consumer behaviors change, the supply chain has to change to serve them.” To give just one example, inventory management plays an enormous role in any e-commerce venture, which is one of the reasons why supply chain management in e-commerce can be such a major help. UPS offers an array of supply chain solutions, including the innovative Ware2Go platform, that can help e-commerce businesses build up agility and maintain visibility throughout the distribution process.

The future of supply chain management

While predicting the future of supply chain management—and supply chains more generally—isn’t easy, there are numerous trends that are worth paying attention to. The pattern-finding capabilities of AI, in concert with more advanced prescriptive capabilities, have the potential to revolutionize strategic supply chain management. Other technological innovations like advanced analytics, blockchain, IoT and immersive technologies may also become more prominent, while the growing importance of traceability and transparency may require shifts to the existing global supply chain management dynamic.

Find out how UPS can help your organization streamline distribution networks, implement leading-edge information systems, receive insight into logistics design and help make your supply chain the best it can be.

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