Supply chain management

Operations, Processes, and Planning

Introduction
• Supply chain management operations govern the overall structure of how a business plans, creates,
receives, and fulfills products.

• Often referred to as OSCM (operations and supply chain management), it involves monitoring,
maintaining, and improving a wide spectrum of both internal and collaborative processes.

• As such, this chapter examines seven elements companies of all sizes regularly overlook in supply
chains:
1.Customer relationships
2.Customer service
3.Demand management
4.Order fulfillment
5.Manufacturing flow
6.Supplier relationship
7.Product development
Customer relationships
• For a company to build a large following of loyal customers, it needs to build a solid
relationship with each and every one of the people or organizations it does business
with.
• As with any type of relationship, the foundation has to be communication and trust.
Regarding communication, suppliers need to be transparent with all information
that may impact the customer in any way. As for trust, the customer needs to be
confident that the supplier will follow through on their end of the deal.
• Customer relationship management, then, intertwines with supply chain
management in two key ways:
• Keeping the customer “in the know” with regard to their order status
• Ensuring the customer receives their order exactly as expected
• While the bulk of supply chain management processes occur “behind the scenes,”
each of these processes ultimately impacts the customer. By keeping the customer
in mind as you improve your supply chain processes, you’ll ensure that any changes
you make will provide a better experience for them.
Customer service
• Customer service management takes the more abstract concepts involved with customer
relationship management, and develops a concrete plan to actually put these ideas into action.

• That said, customer service management involves defining how your team will:

• Optimize communication and the delivery of information between your team and your customers
• Streamline the delivery of technical and other operational support to your customers in need
• Improve your overall processes so as to avoid technical and operational issues in the first place
• Again, supply chain management and customer service management go hand-in-hand: an issue in
one area often means an issue in the other. For example, if a delivery is held up in any way, you’ll
need to know the best way to solve the problem from the customer’s perspective.

• Customer service issues are inevitable, especially when it comes to the unpredictable nature of
supply chains. Rather than taking these issues as they come, you need to have a firm plan in place
for dealing with them when and if they do
Demand management
• Demand forecasting is a key element in planning a supply chain strategy, and in turn determining the
agility and responsiveness of a business to fluctuating demand.
• With demand volatility at an all-time high, there is no ongoing “standard” for most businesses—
which is why demand planning and inventory optimization are a necessity.
• Creating a systematic process for forecasting helps businesses to do the following:
• Maintain optimal stock levels, regardless of fluctuations
• Effectively manage distribution networks
• Maximize warehousing and inventory cost efficiencies
• Make data informed decisions about sales and marketing
• Scale up and expand into new markets
• Respond quickly to changing market conditions
• Prepare budgets, bookkeeping, and accounting
• Reduce the need for safety stock
• All of the above contribute to a more efficient supply chain, increased sales, and improved customer
satisfaction
Order fulfillment
• Order management and fulfillment is a major component of successful
supply chains for both large and small businesses alike.
• Modern order fulfillment revolves heavily around the use of technology. With
automation at the forefront of eCommerce, consumers can now place orders
at the touch of a button — without needing anyone from your team to walk
them through the process.
• If information regarding incoming orders isn’t properly communicated to
those responsible for supply chain-related duties, they aren’t going to be able
to fulfill these duties to the best of their ability.
• Obviously, the worst-case scenario involves your fulfillment team completely
overlooking orders as they come in from your customers. Needless to say, this
can cause even the most loyal customers to defect to a competing brand.
• But a suboptimal approach to order fulfillment can also lead to losses for
your business in the form of wasted resources.
Order fulfillment
• For example, if you don’t have a strategic plan in place for your picking,
packing, and fulfillment processes, you might end up overusing your shipping
materials, facing operational redundancies and obstacles, and increasing the
inherent risk of fulfilling the order altogether.

• On the other hand, improving order fulfillment benefits your overall supply
chain in that you’ll be able to:

• Save time, money, and other resources

• Minimize room for error
• Consolidate real-time information throughout multiple channels
• Provide transparency to your audience
• Individualize the experience for your customers
Manufacturing flow
• Manufacturing flow management refers to the processes involved in ensuring
manufacturing of products occurs in a way that is economical and profitable.
• Essentially, manufacturing flow management involves knowing how much of
a given product will need to be produced at a given point in time—and
creating just enough so as to not risk wasting inventory space, spoilage, etc.
• Proper manufacturing flow management also decreases the potential for
stock-outs due to insufficient orders on your company’s part.
• Since this all deals with the initial stages of the supply chain, it should be
clear that anything that occurs throughout these stages — good or bad — will
affect all else that goes on throughout the supply chain moving forward.
Supplier relationships
• Whether you are an eCommerce retailer or a regular stockist, supplier relationship management
should hover near the top of your must-do list.

• Because suppliers play a critical role in your business, it’s only right to treat them as a partner. A
strong relationship with your suppliers can allow you to further streamline your supply chain,
enhance your ability to deliver value to your customers, and improve your company’s bottom line.

• Forging and solidifying relationships with your suppliers involves:

• Open and honest communication: You need to make sure your suppliers know exactly what you need
and expect from them, so they can easily tailor their services to these needs.

• Forging a solid agreement: In turn, you need to be clear about the value your company brings to the
table. This extends past contractual, on-paper agreements and majors on the overarching benefits
your company will have on their business.

• Developing a solid plan of attack: Forging a strong relationship isn’t something that just “happens.”
Rather, you need to be systematic and strategic in how you engage with your suppliers to ensure a
mutually-beneficial outcome for both parties
Product development and commercialization
The reason you sell the products you do in the first place is because your target customers have a need
for them.

More accurately, your customers have a need for a product that delivers the value yours does. But, your
individual customers’ needs will likely vary in many different ways — and it’s your job to ensure the
product they receive from your company meets these various needs.

This may mean …

Making alterations to your products

Changing its branding, packaging, and unboxing
Providing bulk orders of various sizes or discounts, or even
Developing additional features for a future version of a product.
Whatever the case may be, where and how you differentiate your products for your customer
segments or individual customers will have a huge impact on the rest of your supply chain.

For this reason, it’s vital that you make these individualized alterations as close to the end of the supply
chain as possible.
Supply chain management and logistics:
What's the difference?

• It’s not uncommon to hear the terms “supply chain management” and
“logistics” interchangeably. Perhaps this is because, from a high-level
view, each culminates in the delivery of a product to the end user.
• But thinking supply chain management is synonymous with logistics
misses the point of all that SCM actually involves.
• To bring clarity, let’s first hammer out a definition for logistics
Logistics
• Logistics refers to the movement, storage, and distribution of goods
from initial production to final delivery, completed in a way so as to
meet the consumer’s expectations.
• More simply, logistics is all about ensuring processes are in place so that
the end-user can actually receive the product they order.
• Logistics is mechanical in nature, with the focus being heavily on finding
the path of least resistance when delivering to the customer
Supply chain management vs logistics
• While logistics is a rather large part of supply chain management, it is still only a part of an
even larger picture.

• The key difference is that, while logistics is concerned with supply chain processes in a
vacuum, supply chain management takes a holistic and contextual approach.

• Think of it like this …

• Logistics asks, “The customer wants [product]. How do we get it to them?”

• Supply chain management asks, “How can we improve our supply chain processes to
provide more value to our customers and outperform our competition?”
• Logistics are vital to your overall supply chain management efforts. After all, if your
company literally isn’t able to physically move your products from Point A to Point B, there’s
no way you’ll be able to succeed as a business.

• But, supply chain management involves much more than physically delivering your
products. In involves improving the intertwining and tangential aspects of manufacturing,
storage, delivery, and fulfillment in a way that maximizes your organization’s productivity
and allows your business to truly soar
A note on reverse logistics
• Reverse logistics is the process of dealing with order returns and exchanges.

• As frustrating as returns may be, they’re a part of doing business. According to Statista,
returns cost companies $415 billion in 2018 — meaning more than 10% of revenues from
sales ended up being negated due to reversed sales and the cost of processing these
reversals.

• Though the losses are inherent to the returns process, it is possible for companies to
minimize the various other costs associated with processing returns, such as:

• Validating customer claims

• Processing reimbursement to the customer
• Receiving, restoring, and restocking returned products
• A poorly-planned returns process will, without question, be detrimental to your overall
supply chain and your relationship with your customers. A fully-optimized returns
management plan will easily allow you to make the best out of a less-than-ideal situation.

• Poorly planned logistics and re