The supply chain is the single most important component in procurement. The entire procurement process rests on efficient supply chain management (SCM), which covers the cycle from raw materials to delivery of goods and services.
It goes beyond that, however, and includes things like buyers’ feedback and performance analysis, evaluation of customer satisfaction, and financial accountability.
Effective supply chain management also plays a crucial role in maintaining economic stability and ensuring a functioning society, especially in times of disruptions like the COVID-19 pandemic.
Proper SCM isn’t done on a wing and a prayer. There are several processes that, if followed correctly, enhance the flow by streamlining supply chain operations and maximising output, ultimately improving customer service and growing net profit.
We’re going to look at five of the most critical supply chain processes:
- Planning
- Sourcing
- Manufacturing
- Delivery
- Returns
Planning In Supply Chain And Procurement Management
Everything begins with a plan. In procurement, it starts with aligning supply (raw materials, products) with customer demand.
Ask: What do you need to deliver top-quality services to your niche target audience?
The answer includes employees, equipment, software, tech, materials, and capacity.
Long-term supply chain strategies
Supply chain planning has a long-term component; forecasting buyers’ needs over the following weeks, months, and years. Demand planning or forecasting is valuable because it predicts future demand for products or services, enabling supply chain managers to optimise inventory management.
It can be particularly helpful in seasonal procurement and benefits industries where demand turns on a dime, for example, Valentine’s Day, Easter, Mother’s Day, etc.
Demand planning also plays an important role in customer satisfaction because you can stay ahead of their needs, meeting customer’s needs almost before they become aware of them.
It all boils down to three primary objectives: set goals, develop strategies to meet goals, and measure performance along the way.
Sourcing And Procurement In Supply Chain Performance
Supply chain sourcing is largely about finding and choosing suppliers that don’t just have the ability to meet your needs, but also have values and ethical business practices that match yours.
Some government bodies only need to source one supplier, but often different suppliers are needed for different purposes in a contract. For example, construction contracts might need plumbers, electricians, tilers, painters, and heavy-duty equipment.
Each requires a specialist service or product supplier, which could require different contracts and different approaches to supplier selection criteria, contract negotiation, performance evaluation, and, importantly, relationship management.
Emphasis on supply chain sustainability
Modern supply chains emphasise two important elements in sourcing: ethics and sustainability.
Ethical and sustainable sourcing requires each link in the supply chain to use ethically obtained materials – no child labour or sweatshops – that help government bodies reach sustainability goals, like net zero carbon footprints.
Ethical and sustainable business practices also appeal to buyers and customers (taxpayers) who are likely to choose suppliers that embrace these principles even if they are more expensive than their competitors.
Manufacturing In Strategic Procurement And Supply Chain Management
Supply chain management involves overseeing the entire process of turning raw materials into final products, which is a critical aspect of procurement. This comprehensive process is the essence of manufacturing, where intangible ideas are transformed into tangible items.
Monitoring production processes is crucial to ensure everything runs smoothly. With multiple suppliers, it’s essential to coordinate production and delivery to avoid delays or incur extra storage costs.
During the manufacturing processes, effective resource allocation is paramount. This not only encompasses material and financial resources but also includes employee-related resources, such as adequate training and streamlined operations that are easier, quicker, and potentially safer.
It also covers health and safety, ensuring resources are allocated to meet, if not exceed, health and safety regulations. After all, employees are the most valuable asset in the supply chain.
Wasted resources affect the entire supply chain
We have to add something about resources that are improperly allocated, like inadequate inventory management that leads to over-ordering resources with a time-sensitive lifespan. It could be that the materials are the wrong size. A lot is discarded and goes unused. It could even be energy wastage, like using outdated equipment that needs a lot of power to operate. Newer equipment might have energy-saving features that will provide massive savings in the long run.
Delivery In Supply Chain Management And Logistics
Delivery and distribution is your second last chance to make a good impression on buyers. Rapid delivery, on-time delivery, and safe delivery are all important in this process because delivery times over 30 days, on the wrong day, with cracked products are the best way to make a bad impression.
Order tracking, using dedicated tracking and tracing software, is the best way to ensure the right orders, in the correct quantities, reach the right people. The software can red flag anomalies so you can take corrective action before products are packed and leave the warehouse.
Good logistics and transportation management requires accurate schedule coordination between warehousing and transport, as well as the most efficient mode of transport, the safest and quickest routes to take, and contingency plans if it all goes belly up.
Returns And The Implications For Supply Chain Management
Occasionally, products are returned either because they are faulty, don’t meet specs, or are the wrong items entirely. This is a learning experience because returns can identify an inherent defect in all products of that line or point to delivery services that aren’t quite as careful with fragile items as you would like.
You can then address the defect (and recall all faulty products) and cancel your contract with the delivery company. If you don’t address the problem, you’ll continue to improperly allocate resources, increase wastage and bleed money – not to mention frustrate customers and do serious damage to your business’s reputation.
Prompt and efficient handling of returns (or reverse logistics) makes a good impression on buyers and, despite the incident, improves customer satisfaction and loyalty. The process might even encourage innovation and provide a competitive advantage as new and improved methods are used to ensure the problem never recurs.
Flow In Supply Chain Operations
Flow in supply chain networks is like flow in anything else; it’s the smooth progress of a process that optimises efficiency and performance. In this instance, it’s the smooth flow of the procurement cycle. Managing these flows effectively becomes even more challenging and complex when considering global supply chains, which face issues like sustainability concerns, the impact of the COVID-19 pandemic, and the need for resilience and agility.
While there isn’t consensus on the number of flows (some people say there are 4 flows in the supply chain, others say there are 5), they cover the same ground.
We’re going to look at five flows.
1) Product flow
Product flow refers to the movement of products between suppliers and buyers (customers). It encompasses the delivery process in the supply chain, especially customer demand and the ability to meet customer demand.
2) Information flow
Communication is the key to success. Poor communication leads to misunderstandings, confusion, mistakes, and a whole lot of wasted time, energy, and money. Information flow refers to the smooth communication of information up and down the supply chain.
It’s about sharing information among all parties invested in procurement, from stakeholders to buyers. Objectives include informed decision-making, improved inventory management, and the ability to respond quickly to changes in the market on a local, national, and global level.
3) Cash flow
So, we know what cash flow is. But what does it mean in supply chains?
It’s the flow of payments from the raw materials level to the final payment from the buyer. A smooth flow keeps the supply chain moving seamlessly. Bumps on the way can cause delays, result in dissatisfied buyers, and threaten the financial status of any of the parties along the chain.
Poor cash flow also has knock-on effects on growth, technology adoption, and innovation. There simply aren’t funds to invest in new tech or product development. This can have disastrous effects on performance and supply chain resilience.
4) Demand flow
Demand forecasting occurs during the planning process. As far as flow goes, it’s the smooth investigation and analysis of customer data (particularly regarding preferences) and market trends to align demand with manufacturing and delivery.
Get it right and resource allocation becomes easier and waste is minimised, which is great news for the bottom line.
5) Returns flow
This refers to the way that returns are managed. It applies to returns from procurement buyers as well as between links in the supply chain. The more efficiently returns are managed, the less time and resources are wasted, the more money is saved, and the more satisfied the buyers. This does wonders for your reputation in the public sector and can help better manage supplier relationships.
Use Tech To Enhance Supply Chain Sustainability And Management
From this brief look, we can tell that supply chain management is a lot of hard work with a lot of balls in the air that need to be carefully juggled.
Fortunately, there’s no need to tackle SCM without proper support. Software, like Enterprise Resource Planning (ERP) systems, automates a fair chunk of the process. This is far more accurate than relying on manual systems. Automation also saves a lot of time and frees up staff to pour energy into other core supply chain activities.
The right software will also provide insights based on analytics, which is invaluable in risk management. Real-time data enables key stakeholders to make informed decisions on the spot, if necessary.
Software in supply chain management
One of the most convenient features in software and ERP systems is how the different links in the supply chain can be integrated, providing an overarching view of the whole system, while also providing the ability to zero in on specific processes; macro and micro analysis at the click of a mouse.
Supply chain professionals play a pivotal role in leveraging technology to improve supply chain performance, ensuring that businesses can navigate the complexities of global supply chains more effectively.
Keep Your Eye On The Prize
It can be easy to get lost in the intricacies of procurement and supply chain management. SCM software can keep you on track and help you meet your goals, as long as you can stick to the essence of the five processes and embrace the flow from one link in the supply chain to another.
It’s the essence that you need to remember.
There are no hard and fast rules, and the processes differ across industries. You can work with procurement specialists to learn how to adapt supply chain processes to your unique situation and how to get the most meaning out of the data available.
Delta eSourcing specialises in public sector procurement, but that’s not all. Our Delta Engagement Zone provides plenty of resources so you can learn more about the industry, the relevant supply chain management processes, and procurement and inventory management.
Our expert staff is also on hand to help you navigate procurement and sourcing in the public sector. You can contact us via Live Chat, our helpdesk, or call our sales team directly for more info.
Other options include an obligation-free demonstration and a personalised demo of our analytics feature.
