Supply chain managers work in industries ranging from manufacturing to energy. If you are planning to build a career as a supply chain manager, understanding what supply chain management is and how it works would help you to make an informed career decision. In this article, we answer the question "what is a supply chain manager?", provide definitions for the field of supply chain management and related terms, examine the roles and job description of a supply manager and discuss some skills you need to become one.
Read more: Learn About Being a Supply Chain Manager
What is a supply chain manager?
A supply chain manager is a professional who oversees the supply chain at every stage. The role of a supply chain manager is to plan and execute all the steps needed to purchase raw materials, to distribute them to various units of the business, to ensure that production is running smoothly and producing enough to meet customer demands and to deliver the end products to customers at the right time.
Supply chain managers also work to minimize costs and maximize efficiency. There are several ways they might do this. For example, outsourcing processes such as transportation can provide a more cost-effective solution, automating processes can improve the speed and consistency of processes and eliminating internal errors, overproduction and over-shipment can prevent costly delays.
What is supply chain management?
Supply chain management is the field of operations management that ensures the efficient flow of goods and services, beginning with the storage of raw materials and production of goods right through to the movement of the finished goods to the point of consumption. This process is designed in such a way that helps in coordinating all the components of the supply chain in a quest to minimise the overall cost of production.
One of the goals of supply chain management is to resolve existing conflicts among various chain partners or players through proper coordination and monitoring. For example, the sales department needs to fulfil the demands of the customers and therefore needs a high level of inventory, whereas the warehouse team needs to reduce inventory holding costs and may therefore want to minimise the inventory levels. Companies with an effective supply chain process in place are better able to harmonise the working relationship between the sales department and the warehouse and make a trade-off.
Supply chain management offers the following benefits:
- It handles the entire flow of goods and services starting from raw material procurement to final delivery of finished products.
- It handles the delivery of products and services to ensure customers have a good experience.
- It ensures the company's profitability by minimising costs.
What are physical flows?
Physical flows are the most visible part of the supply chain process of a company. They refer to the physical movement and change in the goods being produced. This can be the physical changes that the raw materials undergo to become finished goods or the storage and movement of goods and services to the end customers.
What are informational flows?
Informational flows refer to the process whereby the different supply chain partners coordinate with each other, organise their long-term plans and make decisions in order to control the daily flow of goods and materials throughout the supply chain. Informational flows are important in supply chain management for the following reasons:
- They help in improving the overall performance of the supply chain.
- They provide the basis on which the supply chain partners can make their respective decisions.
Responsibilities of a supply chain manager
The typical responsibilities of a supply chain manager include:
- Working with procurement managers and suppliers to make sure the right set of products is procured
- Negotiating contracts with suppliers
- Overseeing inventory and planning for storage
- Managing day-to-day orders
- Controlling and monitoring delivery processes
- Minimising wastage of raw materials
- Overseeing logistics and improving shipping practices
- Coordinating with multiple stakeholders and ensuring there is no communication gaps among various departments
- Analysing performance and forecasting for future needs
- Innovating processes and managing risks
Skills required to become a supply chain manager
Supply chain managers need a mix of technical and interpersonal skills to become successful in their roles. While they are mainly responsible for creating and evaluating supply chain strategies and making recommendations for improvements, they also often need to interact with multiple stakeholders, for which strong interpersonal skills are required. Typical skills required to become a successful supply chain manager include:
- Expertise in Lean and Six Sigma tools
- Understanding of business management principles
- Knowledge of supply chain principles
- Strong planning and organisational skills
- Stakeholder management skills
- Conflict-management skills
- Strong problem-solving skills
- Relationship-building skills
- Project management
- Strong analytical thinking
- Time management
- Negotiation and influencing skills
- IT skills and the ability to work on Microsoft Excel and other tools
How does supply chain management work?
Supply chain management works by designing an effective and efficient cross-functional process that deals with the management of the movement of raw materials in a company. It is then followed by the production aspects, which deal with converting the raw materials into finished goods. The final step deals with the process that takes care of the movement of these finished goods to the end customers.
Supply chain management typically helps in centrally linking the procurement of raw materials, the production of goods and the shipment and distribution of final products. Companies are able to reduce wastage, save costs and increase customer satisfaction by delivering products faster when they manage their supply chains effectively. The purpose of supply chain management is to increase trust and partnership among supply chain partners, thereby improving inventory prominence and the speed of inventory movement.
Supply chain management steps
The following are the five stages of cost-effective, efficient and successful supply chain management:
1. The planning stage
Planning is the first step in the supply chain process. In this step, a plan is created to manage all the required resources to meet the demands of the end customers. At the planning stage, the supply chain manager should focus on building a strategy that helps minimise wastage, reduce costs and increase profit margins.
The planning stage is the most important stage in supply chain management, as it facilitates the success of the whole process. After the supply chain is established, the supply chain manager should define the key performance indicators and determine the metrics to measure the efficiency and effectiveness of the whole process.
2. The sourcing stage
The next stage after planning is the sourcing stage, which deals with the sourcing of the raw materials required for the production. The first step in this stage is to choose the suppliers of the raw materials that the company can use to manufacture the end product. After identifying the dependable raw material suppliers, the main focus is on building strong relationships with them and establishing processes to monitor and manage these relationships. Determining different planning strategies for the shipping, delivery and payment of the raw materials is also a key component of this stage.
3. The manufacturing stage
Manufacturing is the third step in the supply chain management process. This stage focuses on the manufacturing, or making, of the finished products as required by the customers. In this stage, supply chain managers plan and execute all necessary activities for designing new products, manufacturing them, testing them for quality, packaging them for shipping and coordinating delivery to customers. This stage is the most metric-intensive stage of the entire supply chain, when organisations can monitor and measure the quality levels, output and worker productivity.
4. The delivery stage
At the delivery stage, customer orders are coordinated and the products are delivered to the end-users. This is the logistics stage, when companies work together for the delivery of orders from customers and launch a network of warehouses. This stage also involves selecting pick carriers to deliver products to the end-users and setting up an invoicing system to accept payments.
5. The return stage
The return stage is the concluding stage of supply chain management. At this stage, customers return any damaged, unwanted or excess products to the supplier. This stage allows companies to deal with customer queries and respond to their complaints. It also works as a feedback loop for the companies.