Supply chain management

Supply chain management (SCM)

Supply chain management, or supply chain management in English,  controls the flow of information and materials to maximize business results  . In short, it is the management of the manufacturer’s relationships with those who provide services, and ensures the reduction of quality and / or cost without any link in the chain that breaks and damages the final product.

The term business logistics can also be used to designate supply chain management.

They can be addressed in two different perspectives chain management: the  cyclical view  or  view  push / pull. What differs from each other is the relationship between the company and the links in the chain.

In the cyclical view, a constant cycle is performed at each stage of the chain. There is the customer cycle, the replenishment cycle (between the retailer and the distributor), the production cycle (between the distributor and the manufacturer), and the supply cycle (between the manufacturer and its supplier).

The push / pull view chooses to push or pull production based on demand. In attraction, the customer pulls, opening a claim. The impulse is an anticipation of the customer’s order based on forecasts and / or speculation.

Characteristics of supply chain management.

  • Planning and monitoring:  Establishing forecasts and monitoring demand are essential for management. Comparative sales and histories are good projections, including fluctuations in consumer demand and unforeseen events. It is also necessary to consider the objectives outlined by strategic planning and marketing and apply them to the supply chain.
  • Beware of suppliers:  a weak link can break the chain. Good management helps the company not to depend on a supplier and compromise the results due to third party problems. You need to look at delays, quality, and even environmental and social factors. An example is the fast fashion chain Zara, whose name was involved in slave labor as a result of a supplier.
  • Information technology:  A well-managed supply chain must have all the links integrated, and one way is through the use of information technology, with specialized software. Flow works best when information is shared between companies. It is preferable to use only one piece of software between all the steps, as more than one program can increase the possibility of human errors.
  • Integration:  Unified inventory management systems are important for supply chain management, so that the supplier knows the real situation of the manufacturer’s inventory and can deliver new supplies with the necessary agility, but also without excesses.

Whip effect on the supply chain

The bullwhip effect is one of the consequences of poor supply chain management. It represents an amplitude in orders placed from one period compared to the other, triggered by a change, even a small one, in consumer demand.

The company varies greatly the orders in a given period, of low demand, for example, and then accelerates the production and orders of raw materials in times of high demand, such as promotions. This variation ends up generating an effect on the supply chain graph that resembles a whip, as an example:

Difference between responsive and efficient supply chain

A responsive supply chain is one that can meet customer demand as soon as it is requested. On the other hand, this movement can increase expenses, which makes the chain less efficient. Efficient is the chain that can best manage production and costs, with a focus on value.

The side on which the chain will hang (responsiveness or efficiency) varies depending on the demand for the product. Items that have a high rate of order uncertainty (such as new products) should have the most responsive string. As for the basic products, with which it is possible to have a reasonable certainty of the demand, the chain can be efficient.