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5 elements you should know about supply chain management

February 18, 2023
Supply Chain
5 elements you should know about supply chain management

Supply chain management refers to optimizing the operation of the supply chain at the least cost, so that the supply chain starts from procurement and goes through all processes to satisfy the final customer.

Supply chain management is the process of coordinating the internal and external resources of the enterprise to jointly meet the needs of consumers. When we regard the enterprises in each link of the supply chain as a virtual enterprise alliance, and regard any enterprise as a department in this virtual enterprise alliance, the internal management of the alliance is supply chain management. It's just that the composition of the alliance is dynamic and changes at any time according to market needs.

Effective supply chain management can help achieve four goals: shorten the cash flow time; reduce the risk faced by the business; achieve profitable growth; and provide predictable revenue.

1. Information management

In the supply chain, information is the communication carrier for all parties in the chain. Enterprises at various stages in the supply chain are integrated through the linkage of information. Reliable and accurate information is the strong support and basis for enterprise decision-making, which can effectively reduce the uncertainty in the operation of enterprises and improve the response speed of the supply chain.

The main line of supply chain management is information management. The basis of information management is to build an information platform, realize information sharing, timely and accurately convey supply and demand information to various enterprises in the supply chain, and further realize supply chain management on this basis.

2. Customer Management

In supply chain management, customer management is the starting point. The supply chain originates with and ends with customer needs. Therefore, supply chain management operates with the core goal of satisfying customer needs.

Due to ever-changing customer needs and individual differences, true and accurate customer management is the top priority of enterprise supply chain management.

3. Inventory management

If we can grasp the information about changes in customer demand in real time and then organize production when customers need it, then there is no need to hold inventory; that is, information will replace inventory, and inventory "virtualization" will be realized.

An important mission of supply chain management is to use advanced information technology to collect information from all parties in the supply chain and market demand, replace physical inventory with real-time and accurate information, reduce demand forecast errors, and thereby reduce inventory holding risks.

4. Relationship management

Modern supply chain management theory provides an effective way to improve competitive advantage and reduce transaction costs. This way is to coordinate the relationship between supply chain members, strengthen contact with partners, conduct transactions on the basis of coordinated cooperative relations, and strive for the overall optimization of the supply chain, thereby effectively reducing the overall transaction costs of the supply chain and synchronously increasing the interests of all parties in the supply chain.

5. Risk management

The cooperation between enterprises in the supply chain will lead to the existence of various risks due to information asymmetry, information distortion, market uncertainty, and changes in other political, economic, legal, and other factors.

In order to enable enterprises in the supply chain to obtain satisfactory results from cooperation, certain measures must be taken to avoid risks in the operation of the supply chain, such as improving information transparency and sharing, optimizing contract models, and establishing supervision and control mechanisms.