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From planning and sourcing raw materials, to delivering your final product and beyond, the supply chain has a lot of moving pieces that must be tracked.
If it's your business to produce goods or services, all of those pieces need to work together smoothly and on time. All in a way that ensures your product or service meets the standards you've set every time, stays on budget and gets to your customers on schedule.
Getting all of the pieces right will give you a competitive advantage, keep your customers happy and positively impact your bottom line. So putting the tools and processes in place to manage and optimize the entire supply chain is critical.
That's where supply chain management (SCM) comes in.
Supply chain management (SCM) encompasses the set of processes involved to manage your supply chain. It's all about overseeing your supply chain, making sure it runs efficiently and ensuring your final product gets where it needs to on time. With more effective supply chain management, you can unlock cost efficiencies , create a more positive customer experience, gain an advantage over your competitors and improve your bottom line.
For that to happen, though, you need visibility into each touch point along the supply chain and to maximize opportunities for efficiencies and cost savings.
Without effective supply chain management, you risk running out of stock and leaving customers unhappy or wasting inventory. Smarter demand planning helps manufacturers keep costs down, minimize waste and ensure the supply chain is moving efficiently. All this is in service of helping you increase profit margins, improve the customer experience and optimize your prices—making you more competitive as a whole.
But manufacturers have had it rough the last few years, dealing with unstable supply chains due to the pandemic, geopolitical conflicts, inflation pressures and threat of a possible recession. And unfortunately experts see no end in sight.
KPMG’s global supply chain trends survey from November 2022 found that 71% of companies cite raw material costs as the top threat they see for their supply chain in 2023. In light of this, two thirds of global business leaders surveyed said they’re focusing on increasing their visibility into their supply chains to maintain operational stability going forward.
Before we get into how you can create that much needed visibility into your supply chain to unlock faster decision making, let’s go back to the essentials. What does the supply chain management process look like for manufacturers?
Traditionally, there are five stages to the supply chain management process. Here they are in order:
The first step in building an effective supply chain is planning what supply you need based on customer needs. During the planning stage, organizations also determine the materials, staff and resources they require at every step of the manufacturing cycle, to keep the supply chain moving and orders fulfilled.
Effective sourcing is all about developing relationships with suppliers and working with them to get the materials you need at every point of the manufacturing process. To get the sourcing stage right, you need those materials to meet your quality and quantity requirements, while costs and timing must also align so your prices and output meet market expectations.
This is the stage that probably first comes to mind when considering the manufacturing process. At this point, raw materials are taken in and converted into an end product. The use of raw materials, as well as any waste, may also be tracked to ensure you have the most efficient process possible.
Of course, the manufacturing process isn't the end of a product's journey. Your goods or services also need to be sold and shipped to customers. This is where the delivery stage comes in. Delivering requires logistics and the right delivery channels--and to keep customers happy, it should be done efficiently, on schedule and as cost effectively as possible.
Finally, there should be a process in place to allow for customer returns—whatever the reason. Returns may happen because customers aren't happy with a product, if a product is recalled or when there's an error in an order. Whatever the case, companies need to be able to accept and process those returns and provide refunds for products that are sent back.
Even though there are five common stages to SCM, supply chain management doesn't look the same for everyone. Each manufacturer will have different needs and goals, depending on the product they're producing, their industry and their customers. These are the six most common supply chain models:
This is a traditional supply chain model that's especially used in mature industries—where manufacturing companies produce the same product continuously, with little fluctuation in demand.
When demand is unpredictable, an agile model may be a better fit. It offers flexibility that lets a manufacturer speed up, slow down or change direction on their supply chain based on customer demand and market needs.
Some manufacturers have fluctuating demand throughout the year, often based on seasonal changes. This is where a flexible model comes in handy, as it's designed to allow you to easily shift supply chain output based on those changing needs.
This model is especially useful when a product has a short life cycle. It allows for quick turnover when a manufacturer wants to take advantage of a trend and sell as much as possible before that trend is over.
When profit margins are tight, this model ensures manufacturers are using equipment, managing inventory and processing orders as efficiently as possible.
When none of the other models work for you, or if you're a manufacturer with highly specialized needs, a custom model may be required, built specifically to your unique requirements.
In the face of volatile demand, finance teams within manufacturing companies need access to real-time data analytics so they can forecast more often.
What makes this difficult, however, is when the data you need for this level of granular reporting—unit sales, revenue by unit, point of sale, etc.—exists in multiple different systems. Many teams rely on exporting this data manually, meaning by the time they’ve been able to analyze it, it’s already gotten stale.
The first step to creating the level of visibility into your supply chain that will get your entire organization on the same page, is getting your data sets into one place in an automated way.
Aurora Plastics, a manufacturer of high-quality polymers based in Ohio used to manage their financials in offline Excel spreadsheets before they made the jump to an intelligent planning platform. Because their finance team had limited reporting capabilities, when working with their purchasing team, they could only plan for demand one month ahead.
After implementing Vena in 2021, Aurora Plastics can now easily drill down into their reporting at the transaction level and filter their data by SKU, sales representative and customer segment. This allows their finance team to order raw materials with greater cost efficiency and project sales more confidently—based on real-time sales data and not simply historical averages. As a result, the company was able to increase their demand planning from a one month outlook to a rolling twelve months.
“The forecasting that we've moved into Vena allowed us to stay on top of that hyperinflation and make sure our margins weren't being squeezed, and that we had the proper response to the inflation so that we can maintain our shareholder value,” said Joe Morris, Aurora Plastics’ VP of Finance and Corporate Controller. You can read Aurora Plastics’ full story here.
Intelligent planning software can help you build a more efficient, productive supply chain by giving you the power to plan, manage and track every stage. Vena supports manufacturing companies by allowing them to optimize the entire product lifecycle with functionality such as:
Demand and Revenue Planning
Integrated Business Planning
Supply Planning
With the right software in place, you can better manage your orders, reduce costs and optimize your entire supply chain.
All of this helps you continue to work efficiently and effectively--to remain competitive and stay agile in the face of change.
Leverage this free template to forecast unit sales and perform custom order planning based on prior year numbers.
As Senior Director of Content and Communications, Jonathan Paul leads content strategy and execution at Vena, overseeing the development of owned media and content experiences that help finance professionals fuel business health, as well as their personal and professional growth. When he's not dreaming up new ways to offer audiences value through content creation, Jonathan loves to lose himself in an immersive video game with a solid narrative, lose golf balls pretending to be good at golf and lose time dreaming about time travel.
