What is supply chain management (SCM)?

Supply chain management is the process of delivering a product from raw material to

the consumer. It includes supply planning, product planning, demand planning, sales

and operations planning, and supply management.

Why supply chain management is Important

A positive or negative impact on the supply chain resounds throughout the business.

There are two core areas to the impact: customer happiness and ROI.

Happy customer = happy business = higher performance

In January 2018, Tobin Moore from Optoro pointed out this striking statistic at Retail’s

Big Show: If a customer is happy with the way their return process was handled, they’re

71 percent more likely to become a repeat customer.

A smooth return process means an effective supply chain, one that’s well connected

and involves communication along the chain. When the supply chain meets or exceeds

the expectations of the customer, it’s because of efficiencies. The entire business

benefits through higher-order rates, positive sentiment in the customer’s mind, and

lower cost-to-serve for the business.

Higher performance = more cost efficiency = higher pressure?

Higher performance is measured in terms of the efficiency of all processes and people

to move goods and services to market along the supply chain.

Increased supply chain efficiency can translate to pressure on the team and their

capabilities, as costs and budgets are held flat or reduced when they’re expected to

move the same or a greater volume of product at the same or a higher quality level.

Improvements to profits for the business are measured via metrics like working capital

turnover or cash conversion performance; as business health improves, profitable cash

management and revenue conversion are the result. Flattening the cost curve often

becomes a challenge unless two factors are considered: new capabilities (process and

data) that drive faster, higher-quality decisions; and using a tool that scales favorably for

the value it delivers for the business.

What is the supply chain management process?

The supply chain management process is composed of four main parts: product

portfolio management, demand management, S&OP, and supply management.

1. Demand management

Demand management consists of three parts: demand planning, merchandise planning,

and trade promotion planning.

Demand planning is the process of forecasting demand to make sure products can be

reliably delivered. Effective demand planning can improve the accuracy of revenue

forecasts, align inventory levels with peaks and troughs in demand, and enhance

profitability for a particular channel or product.

 Merchandise planning is a systematic approach to planning, buying, and selling

merchandise to maximize the return on investment (ROI) while simultaneously making

merchandise available at the places, times, prices, and quantities that the market

demands.

Trade promotion planning is a marketing technique to increase demand for products in

retail stores based on special pricing, display fixtures, demonstrations, value-added

bonuses, no-obligation gifts, and other promotions. Trade promotions help drive short-

term consumer demand for products normally sold in retail environments.

2. Supply management

Supply management is made up of five areas: supply planning, production

planning, inventory planning, capacity planning, and distribution planning.

Supply planning determines how best to fulfill the requirements created from the

demand plan. The objective is to balance supply and demand in a manner that achieves

the financial and service objectives of the enterprise.

Production planning addresses the production and manufacturing modules within a

company. It considers the resource allocation of employees, materials, and of

production capacity.

Production/supply planning consists of:

 Supplier management and collaboration

 Demand and supply balancing

 Production scheduling

Inventory planning determines the optimal quantity and timing of inventory to align it

with sales and production needs.

Capacity planning determines the production staff and equipment needed to meet the

demand for products.

Distribution planning and network planning oversees the movement of goods from a

supplier or manufacturer to the point of sale. Distribution management is an overarching

term that refers to processes such as packaging, inventory, warehousing, supply chain,

and logistics.

3. Sales and operations planning (S&OP)

Sales and operations planning (S&OP) is a monthly integrated business management

process that empowers leadership to focus on key supply chain drivers, including sales,

marketing, demand management, production, inventory management, and new product

introduction.

With an eye on financial and business impact, the goal of S&OP is to enable executives

to make better-informed decisions through a dynamic connection of plans and

strategies across the business. Often repeated on a monthly basis, S&OP enables

effective supply chain management and focuses the resources of an organization on

delivering what their customers need while staying profitable.

 4. Product portfolio management

Product portfolio management is the process from creating a product idea creation to

market introduction. of creating an idea for a product and following through on it until the

product is introduced to the market. A company must have an exit strategy for its

product when it reaches the end of its profitable life or in case the product doesn’t sell

well.

Product portfolio management includes:

 New product introduction

 End-of-life planning

 Cannibalization planning

 Commercialization and ramp planning

 Contribution margin analysis

 Portfolio management

 Brand, portfolio, and platform planning

5. Supply chain management best practices

To succeed in a growing global market, you need a supply chain that’s connected from

start to finish, across your enterprise and beyond. Here are five steps we recommend to

achieve connected supply chain planning.

Make the move to real-time supply chain planning

When using ERP systems and spreadsheets for planning, companies typically rely only
on historical data, resulting in little wiggle room for changes should any disruptions

occur in demand or supply. For example, based on the previous year’s numbers, a

company can estimate the number of products it will sell in the next quarter. But what if

a massive hurricane destroys a key distribution center, leading to too little supply on the

shelves? With Anaplan’s real-time connected supply chain planning solution, you can

create “what-if” scenarios and plan more effectively so you’re ready when disruptions

occur.

Unify supply chain planning with enterprise planning

A vital second step is connecting traditionally soloed supply chain planning to sales and

operations planning and financial planning. Companies can benefit from synchronizing

their short-term operational planning with their wider business planning processes to

make real-time updates to inventory forecasts and supply. Deploying real-time S&OP

solutions that enable enterprise-wide collaboration means that key stakeholders across

the business can create new scenarios and quickly assess how to use their resources

to optimize profitability when an unforeseen event happens.

Anticipate the demand of the end customer

For consumer packaged-goods companies, anticipating what customers want and when

they want it is an ongoing challenge. A solution like Anaplan allows end-to-end visibility

across the supply chain and beyond an existing network of wholesalers and retailers to

sense demand signals from customers. When changing consumer sentiments can be

rapidly identified and changes to demand for the product assessed, the company,

partners, and customers benefit from improved profitability, margins, and lead time.
Leverage real-time data across all points of the supply chain

Because supply chain planning typically involves a myriad of suppliers, channels,

customers, and pricing schemes, models can become large and potentially unwieldy—

especially when spreadsheets are the primary planning tools. Incorporating a solution

that uses real-time data allows planning with great accuracy and reduces the risk of

stock-outs or surplus inventory.

Ensure the flexibility to cope with change

When technology facilitates efficient planning and quick reactions, disruptions aren’t

disruptive because re-planning and re-forecasting is easy—resulting in time and money

saved and increased profitability.

Important Supply chain trends

What will the supply chain look like in the future? Here are a few key trends in supply

chain management.

Artificial intelligence and machine learning

History-based forecasting is used to drive supply chain planning, but artificial

intelligence (AI) and machine learning (ML) are primed to change that forever. AI- and

ML-based predictive models will transform processes like demand sensing, shaping,

and orchestration, as well as supply planning. AI will begin to drive dynamic pricing, and

new product introductions will be based on predictive market intelligence. AI and ML will

also drive new models for product promotions management, as well as responses to
disruptions in the supply chain. AI and ML predictions will play a key role in the future of

supply chain operations and have a transformative effect on other business processes.

Regulatory challenges and security risks

With the continued risk of high-profile hacks that compromise the information of millions

of consumers, companies will need to raise the standards of their privacy and protection

protocols this year. New regulations to protect privacy that go into effect this year, such

as General Data Protection Regulation (GDPR), will also affect company operations.

Tax reform, Brexit, political instability, oil prices, and resource availability will all require

action across the enterprise, including within the supply chain. As a result, supply chain

planners will need sophisticated modeling capabilities to plan for all potential scenarios.

Blockchain and beyond

Blockchain has already transformed the way trading partner networks collaborate. As

2019 progresses, the technology will continue to remove banks from the picture,

leverage cryptocurrency, and distributed ledgers, and enable better collaboration.

Blockchain will also play a role in making collaboration a bigger factor in supply chain

planning and execution. Track and trace, once a radio frequency identification (RFID)-

focused movement, uses sensors and devices across assets and machines and will

continue to be used in new ways this year. Thanks to the Internet of Things (IoT), data

will permeate the supply chain and be used to transform processes once it’s analyzed

and consumed by AI and ML.

A dynamic, connected future

Supply chain managers are always looking for new ways to take advantage of
 opportunities and to overcome obstacles as the modern supply chain evolves. With a

connected supply chain planning approach and the use of new technologies, data is

brought together, and more people are integrated into decision-making processes. As

the supply chain of the future comes into view, these trends will play a key role in supply

chain transformation.

What is the Digital Supply Chain and how to be

successful
The digital supply chain is the next generation of supply chain management. Companies

must recognize that “global digital supply chains” or “the digitalization of supply chains”

aligns with the notion that the future of business is heavily rooted in a digital

transformation revolution: the blockchain, the internet of things, advanced robotics, and

much more. Here are five ways that progressive enterprises are leveraging

blockchain for supply chain success.

 Blockchain for smart contracts: Blockchain unravels the immense complexity

and interconnectedness of global digital supply chains. It does this by storing all
relevant information in a master ledger (the blockchain). Smart contracts ensure that by
storing the terms of a contract in the blockchain and measuring all proposed
transactions against it, issues with data redundancy are reduced and trading partners
can work together much more efficiently.

 Blockchain for sustainable and ethical supply chains: When a product (or

batch of products) is sourced or created, it can be given a unique identifier that’s
encrypted. This identifier can be linked to a token that’s time-stamped and follows the
product throughout the supply chain. All of this information is stored on the blockchain,
enabling supply chain leaders to make sure it was produced or sourced in an ethical,
sustainable manner, while concurrently lending operational efficiencies to the overall
process of bringing a product to market. Some companies are also harnessing the
power of blockchain to support positive and social-environmental change, such as the
opportunity to say “thank you” (in the form of a blockchain token) to people involved in
producing the products they buy.
 Blockchain for better security: Keeping the supply chain secure is a high-
stakes issue across enterprises, with valuable inventory and confidential information
changing hands at a fast pace across the globe. Because a blockchain ledger is
immutable by nature and set up so everyone involved has a complete copy, it’s virtually
resistant to hacks and cannot be altered without the sequential permission of pertinent
parties. The built-in safeguard of an immutable ledger makes audits easier and data
incorruptible. It further decreases the risk of cyber-attacks because it uses a distributed
storage system.

 Blockchain for greater efficiency: Right now, millions of products are traveling

across the world via global supply chain operations. These products all have information
attached to them, such as origin, destination, serial number, and manufacturer. When
blockchain is used, it reduces digital supply chain risk by making it possible to track
products through every stage of the journey, and eliminates the need for dedicated
software or multiple planners dedicated to monitoring the millions of products traveling
through the supply chain.

 Blockchain for greater efficiency: Because blockchain is immutable and

transparent, all parties involved in the digital supply chain can track relevant information
to a product and access that information in real-time. This yields a significant boost to
supply chain efficiency. Smart contracts help further raise the efficiency bar, as this
safeguard can prevent time lost wrangling over contract issues. Because a collection of
terms and conditions travel with a product through the supply chain, this prevents
recurring searches for blame when disputes over that information arise.

What skills are needed for supply chain management

To lead the way into a transformative future, they need to combine technical and

business knowledge with collaboration and communication skills. The ability to influence

department leaders that partner with supply chain is key, as well as the skills to interact

intelligently with leaders across the organization is essential, because supply chain

initiatives often reach across business units. And strong business acumen is a must-

have—you’ll be more effective working with your counterparts in finance, sales, and

marketing if you can speak their lingo. The effective supply chain leader of tomorrow is

tech-savvy and comfortable working alongside the world of “machines.”

When speaking of the potential conflict between man and machine, some have said that

artificial intelligence won’t replace managers, but managers who work with AI will

replace managers who don’t. This highlights the transformation taking place in supply

chain: humanity is essential, but so is technology. It’s not a paradox; it’s the new

normal. This leader is digitally dexterous, but also skilled with people. And this leader is

a storyteller—digging into the countless layers of the supply chain to find the issues and

weaving the right story together to help solve them. The many-faceted role of a supply

chain leader is changing as we speak. To thrive in this new world, supply chain

professionals should grow their capacities in collaboration, communication, and

leadership, and pair those skills with in-depth technical knowledge to become a

powerful force for the future of supply chain management software.

ADVICE PIECE

EIGHT KEY BUSINESS PROCESSES

FOR A SEAMLESS SUPPLY CHAIN
MANAGEMENT
3 MINUTE READ/0 COMMENTS/BY K3 SYSPRO

Supply chain management is the unsung hero of the manufacturing sector. It’s not glamorous – there’s
nothing tangible to validate your efforts – but it’s the foundation that supports every manufacturing
business.  A seamless supply chain improves inventory management, keeps waste to a minimum and
frees up capital that would otherwise be tied up in stock – so it’s worth getting right! However,  supply
chain management doesn’t happen in isolation, it is built on the foundation of key business processes.
Looking at some of these key processes, we can see how a best-of-breed ERP system such as SYSPRO
offers a platform for Supply Chain Integration:

Customer Relationship Management

Creates a structure for developing and maintaining relationships with customers. Individual customers or
groups are identified, based on their value over time, and their loyalty can be enhanced by providing
tailored products and services. Cross-functional customer teams develop Product and Service
Agreements (PSA) to meet the needs of key accounts and for segments of other customers. They also
work with key customers to improve processes and eliminate demand variability and non-value added
activities. Performance reports are designed to measure the profitability of individual customers as well as
the financial impact on the customer.

The SYSPRO software solution enables companies to collect, maintain and manipulate a rich, customer-
related database to promote increasing revenue and profitability. Our Sales and Distribution solutions and
SYSPRO Reporting also support the CRM process.

Supplier Relationship Management

Defines how a company interacts with its suppliers. As in the case of customer relationship management,
a company will form close relationships with some of its suppliers, while others are less closely cultivated.
Good supplier relationship management involves devising the right PSAs and managing them well, so
that the company and its suppliers continue to benefit from the most favourable trading arrangements.

Customer Service Management

Operates at the customer interface. It provides the key point of contact for administering the PSA and can
give the customer information on orders, shipping dates and product availability. SYSPRO ERP
manufacturing and logistics modules supply the data required by customer service management.

<Demand Management

Allows a company to be proactive in matching supply to demand. The process includes forecasting and
synchronization of supply and demand, in order to increase flexibility and reduce demand variability. The
process should employ customer intelligence, historical sales information and planned marketing efforts
to forecast and influence demand.

The Order Fulfilment

Process involves more than just filling orders. It includes all activities necessary to define customer
requirement and to design a process that allows a company to meet customer requests, while minimising
the total delivered cost. This is not just the logistics function, but instead needs to be implemented cross-
functionally and with the coordination of key suppliers and customers. The objective is to develop a
seamless process from the supplier to the organisation and to its various customer segments.

Manufacturing Flow Management

Includes all the activities necessary to move goods through production and to obtain, implement and
manage manufacturing flexibility in the supply chain. Manufacturing flexibility reflects the ability to make a
wide variety of products at an appropriate rate and at lowest possible cost. To achieve the desired level of
manufacturing flexibility, planning and execution must extend beyond the production site to encompass
the entire supply chain.

Clearly, managing manufacturing flow requires an element of manpower planning. In the case of
SYSPRO, our Equator HR module integrates with the ERP system to facilitate this planning.
Product Development and Commercialisation
Provides the structure for developing and bringing products to market in unison with customers and
suppliers. The product development and commercialisation process team must coordinate with customer
relationship management to identify customer articulated and unarticulated needs; select materials and
suppliers in conjunction with the supplier relationship management process; and develop production
technology in manufacturing flow to manufacture and integrate into the best supply chain flow for a given
product/market combination.

Returns Management

Is the SCM process by which activities associated with product returns, reverse logistics, gatekeeping,
and avoidance are managed within the firm and across key members of the supply chain. The correct
implementation of this process enables management not only to manage the reverse product flow
efficiently, but to identify opportunities to reduce unwanted returns and to control reusable assets such as
containers. Effective returns management is an important link between marketing and logistics, offering
an opportunity for competitive advantage.