What Is Supply Chain Management?
Supply chain management, also known as SCM for short, is a critical function for manufacturers, distributors, wholesalers, and retailers alike.
SCM involves the planning, execution, and monitoring of processes related to sourcing, manufacturing, inventory, demand, transportation, distribution, and returns from raw materials to the end consumer.
Proactive supply chain management helps maximize customer value and enables organizations with a major competitive advantage. In this piece we will explore SCM functions and benefits for both shippers and logistics service providers (LSPs).
Business functions that are impacted by supply chain management:
SCM helps organizations answer foundational questions that are essential to their business plan and daily operations. Take for example the different topics below:
- Where should I source products from?
- How do I calculate duties/taxes?
- Can I do business with this vendor/customer?
- How do I get my compliance data right ( Harmonized System Codes, HS) so I can get product through customs?
International Supply Chain
- How do I manage/optimize air & ocean rates?
- How do I increase my revenue by providing my customers a self-serve booking?
- How do I comply with government regulations so that my product doesn’t get stuck at customs?
- How do I get visibility to my shipments?
Domestic Supply Chain
- Which mode is cheapest to ship product?
- Which carrier/broker should I use to cover this load?
- How do I increase my on-time % / service levels?
- How do I get real time visibility to my shipments?
- How do I minimize my safety stock?
- How do I reduce costs in light of rising costs?
- How do I keep drivers in this market?
- How do I increase my on-time % / customer satisfaction?
- How do I ensure I’m in compliance with all government hours of service (HOS) regulations?
- How do I get to a paperless delivery process?
- How do I make sure I don’t sell product that is out of stock?
- How do I make sure I get the right item to the customer?
- How do I automate my shipping process?
- How do I make sure I’m getting the product to the customer at the right balance of cost and service?
Identifying and implementing supply chain management solutions to help address these questions can open the door to significant opportunities for performance improvement and profitability. Even more benefits can be realized when utilizing a single provider for multiple SCM solutions when considering security, user training, professional services, and IT investment.
The Importance of Supply Chain Management for Shippers
Shippers are constantly seeking ways to transport their goods in the most efficient, timely, and cost-effective manner. Effective SCM enables shippers to have better control over their inventory, manage shipping schedules more accurately, and reduce costs. Some example key performance indicators (KPIs) to set continuous improvement processes around include:
|Transportation Spend as a Percentage of Sales
|On-time Delivery Performance
|Carrier Tracking Compliance
|Carrier Detention Fees and Penalties
|Shipment Lead Times
|Revenue per Employee
The Importance of Supply Chain Management for Transportation Partners
Freight brokers/forwarders and carriers form the backbone of the supply chain industry. Effective supply chain management plays a pivotal role in optimizing the interactions and operations of shippers with their carriers and brokers, ultimately boosting the connection & communication for a smoother operation.
For Freight Brokers/Forwarders:
Freight brokers and forwarders often act as the critical link between shippers and carriers. SCM is indispensable for them, as it provides the tools and insights needed to gain real-time visibility into carrier availability, freight rates, and shipment statuses. This not only improves the brokerage experience but also enhances their ability to make a profit and provide value-added services to their clients, such as performance reporting and solutions to achieve greater utilization, lower emissions across the supply chain.
Carriers are at the heart of the supply chain, responsible for the physical movement of goods. For them, SCM is crucial in maximizing fleet utilization, optimizing routes, and reducing empty miles. Advanced supply chain management systems allow carriers to access a broader network of shipping opportunities, improving load matching, and reducing turnaround times.
What are the Benefits Supply Chain Management Can Provide?
Enhanced Visibility and Control
The first and foremost advantage of SCM is the unparalleled visibility it offers into every aspect of the supply chain. Solutions that offer real-time tracking provide businesses with up-to-the-minute information on shipments/loads. This level of insight facilitates proactive decision-making, minimizes the impact of disruptions, improves the customer experience, and enhances overall operational transparency—a critical factor in today’s demand-driven market.
Cost Reduction and Optimization
Efficient SCM is synonymous with cost savings and operational efficiency. By optimizing loads, selecting the right mode, building multi-stop routes, and sourcing better rates, businesses can significantly lower transportation costs. Furthermore, advanced analytics and forecasting tools enable companies to better predict demand, manage inventory levels, improve communication that ultimately leads to a more agile supply chain.
Improved Customer Satisfaction
In today’s fast-paced world, customers expect quick, reliable, and transparent transportation services. A quality supply chain management solution allows businesses to meet these expectations consistently. Utilizing high quality and timely data & analytics, LSPs and shippers can ensure timely deliveries and maintain a high level of service quality.
Logistics-intensive businesses face many risks on a daily basis:
- Volatile markets
- Poor carrier performance
- High rates & thin margins
- Regulatory compliance
- Capacity issues
- Single sourcing / Network bottlenecks
- Shipment & supply chain disruptions
- Bad Actors / Trading partners
- Security and Liability
Through supply chain management strategies (that include back-up strategies), equipped with real-time monitoring and predictive analytics, shippers, freight brokers, and 3PLs can dampen the damage posed by potential disruptions and industry risks. This risk mitigation is crucial in maintaining operational efficiency.
Sustainability and Ethical Responsibility
As global awareness of environmental and ethical issues grows, sustainable supply chain practices have become a business imperative. As end-consumers consideration of Environment, Social, Governance (ESG) factors when making purchases continues to grow, effective SCM will enable companies to monitor and optimize their carbon footprint, ensure ethical sourcing practices, and comply with environmental regulations, thereby aligning business operations with their customers and corporate social responsibility goals.
Improved Operational Efficiency
Effective supply chain management streamlines operations by optimizing various processes, from sourcing to product delivery. A good SCM solution helps integrate and optimize all facets of operations, ensuring a smoother flow of materials and information across the supply chain. With SCM, businesses can reduce process complexities, minimize delays, and eliminate redundancies. This streamlined approach results in faster turnaround times and more reliable warehouse operations and production schedules.
Greater Flexibility and Responsiveness
Supply chain management empowers companies with the agility to swiftly adjust to disruptions, market fluctuations, and evolving customer needs. This helps operations teams maintain a competitive edge and relevance in the marketplace. This flexibility also ensures that businesses can proactively respond to various challenges and opportunities, keeping them at the forefront of their industry. With SCM, companies are better positioned to meet the dynamic demands of the market, aligning their operations with current trends and customer preferences.
Better Relationships & Collaboration
A strong logistics management platform promotes healthy relationships with suppliers and other parties, which can lead to better pricing, quality, and reliability. By streamlining interactions and coordination efforts, the result is faster adaptability to market shifts and supply chain interruptions. Effective inventory control is another benefit, ensuring product availability aligns with demand, thereby reducing instances of excess stock or shortages. Furthermore, the analytical capabilities of an advanced SCM platform provide deep insights, aiding in strategic planning, improving forecast precision, and encouraging ongoing enhancements throughout the supply chain.
Real World Example of Supply Chain Management
A case study done with Albertsons Companies Inc., the second largest supermarket chain in the United States, found that the lack of supply chain visibility significantly inhibited their logistics management.
Albertsons became concerned about their product spoilage, in this case, fresh produce. In the event of delayed shipments or disruptions, Albertsons needed a contingency plan in order to ensure that produce stayed fresh and to avoid losses.
Albertsons identified the need for a supply chain management and visibility platform to minimize the impact of shipment disruptions, and ultimately save their product from spoiling.
After integrating with a supply chain management and visibility platform, Descartes MacroPoint, Albertsons was able to avoid disruptions and greatly enhance productivity.
- Enhanced Visibility: The implementation of real-time tracking for all shipments, whether they were incoming or outgoing from plants, distribution centers, or stores, allowed Albertsons to optimize the distribution of perishable produce and other items. This heightened level of visibility was crucial in managing products with specific expiration dates.
- Streamlined Efficiency: The integration of Descartes MacroPoint visibility tools empowered Albertsons’ centralized corporate traffic team to manage a larger volume of business more effectively. This was particularly significant in handling shipments that were previously managed by local divisional teams before the Albertsons-Safeway merger.
- Optimized Inventory Management: Access to real-time shipment information enabled the traffic team to proactively identify potential delays. This insight allowed them to assess inventory levels accurately and communicate with procurement to source alternative products when necessary, thus preventing product shortages and ensuring shelves remained stocked.
- Enhanced Collaboration: The partnership with the Descartes MacroPoint team brought about a more collaborative environment. Through active engagement with Albertsons and its carriers, Descartes MacroPoint played a key role in providing guidance, resolving challenges, and enhancing shared operational processes.
The transformative power of supply chain management (SCM) in enhancing business operations is undeniable. As the comprehensive case study of Albertsons demonstrates, integrating advanced SCM solutions like Descartes MacroPoint can lead to significant improvements in visibility, efficiency, and collaboration across the supply chain.
By optimizing every aspect of SCM, from real-time tracking to inventory management, Descartes MacroPoint equips freight brokers and shippers to navigate the complexities of today’s market with confidence.
Speak with a member of our team today to get started.