Supply chain management

Supply chain management (SCM) is the optimization of a product's creation and flow from
raw material sourcing to production, logistics and delivery to the final customer.
SCM encompasses the integrated planning and execution of processes required to manage the
movement of materials, information and financial capital in activities that broadly
include demand planning, sourcing, production, inventory management and storage,
transportation -- or logistics -- and returning excess or defective products. Supply chain
management relies on both business strategy, specialized software and collaboration to work.
Need / Benefits of supply chain management
Supply chain management creates a number of benefits that translate to higher profits, better
brand image and greater competitive advantage. These include the following:
 better ability to predict and meet customer demand;
 better supply chain visibility, risk management and predictive capabilities;
 fewer process inefficiencies and less product waste;
 improvements in quality;
 increased sustainability, both from a societal and an environmental standpoint;
 lower overhead;
 improvements in cash flow; and
 more efficient logistics.
Five stages of supply chain management
Supply chain management can be broadly categorized into five steps or areas:
Plan. Using supply chain analytics and materials management features in ERP systems,
organizations create strategic plans to meet customer demand for product and avoid
a bullwhip effect.
Source. Organizations identify and select vendors that can supply materials in a streamlined
and efficient way according to agreements. Supply chain collaboration starts at this stage and
is important throughout the supply chain management process.
Make. In this stage, products are manufactured. It includes scheduling the production,
testing, ensuring compliance requirements are followed, packing, storage and release.
Multiple machines are likely to be involved, especially for larger companies, and these
increasingly use technologies such as IoT and AI to work more efficiently.
Deliver. The delivery stage pertains to logistics and focuses on getting finished goods to
consumers, in whatever manner of transportation is needed. As the Amazon effect has grown,
especially as a result COVID-19, more focus is on doorstep delivery. Greater emphasis is
now also on supply chain leaders working more closely with customer service. Inventory
management and warehouse management systems are especially crucial at this stage.
Return. The return stage includes all product returns, including defective products and
products that will no longer be supported. This stage also includes elements from other
stages, including inventory and transportation management.
Global Optima
Optimization is the process of finding the point that minimizes a function. More specifically:
 A local minimum of a function is a point where the function value is smaller than or equal
to the value at nearby points, but possibly greater than at a distant point.
 A global minimum is a point where the function value is smaller than or equal to the value
at all other feasible points.

Generally, Optimization Toolbox™ solvers find a local optimum. (This local optimum can be
a global optimum.) They find the optimum in the basin of attraction of the starting point. For
more information, see Basins of Attraction.
In contrast, Global Optimization Toolbox solvers are designed to search through more than
one basin of attraction. They search in various ways:
 GlobalSearch and MultiStart generate a number of starting points. They then use a local
solver to find the optima in the basins of attraction of the starting points.
 ga uses a set of starting points (called the population) and iteratively generates better
points from the population. As long as the initial population covers several basins, ga can
examine several basins.
 particleswarm, like ga, uses a set of starting points. particleswarm can examine several
basins at once because of its diverse population.
 simulannealbnd performs a random search. Generally, simulannealbnd accepts a point if it
is better than the previous point. simulannealbnd occasionally accepts a worse point, in
order to reach a different basin.
 patternsearch looks at a number of neighboring points before accepting one of them. If
some neighboring points belong to different basins, patternsearch in essence looks in a
number of basins at once.
 surrogateopt begins by quasirandom sampling within bounds, looking for a small objective
function value. surrogateopt uses a merit function that, in part, gives preference to points
that are far from evaluated points, which is an attempt to reach a global solution. After it
cannot improve the current point, surrogateopt resets, causing it to sample widely within
bounds again. Resetting is another way surrogateopt searches for a global solution.
Three Key Issues in Supply Chain Management
Key Issue #1: Globalization
Globalization presents several critical supply chain management challenges to enterprises and
organizations:
First, to reduce costs across the supply chain, enterprises are moving manufacturing
operations to countries which offer lower labor costs, lower taxes, and/or lower costs of
transport for raw materials. For some companies, outsourcing production involves not only a
single country, but several countries for different parts of their products.
However, outsourcing not only extends the production process globally, but also the
company’s procurement network. Having suppliers in different geographic locations
complicates the supply chain. Companies will have to deal with, coordinate, and collaborate
with parties across borders regarding manufacturing, storage, and logistics. Furthermore, they
have to extend or maintain fast delivery lead times to customers who want to receive their
products on schedule despite the increased complexity in the manufacturer’s supply chains.
Finally, they also have to maintain real-time visibility into their production cycle — from raw
materials to finished goods — to ensure the efficiency of their manufacturing processes.
Second, as companies expand sales into global markets, localization of existing products
requires a significant change in the supply chain as companies adapt their products to
different cultures and preferences. There is an inherent risk of losing control, visibility, and
proper management over inventory , especially if enterprise applications are not integrated.
This requires managing diverse structures of data across geographies effectively.
For example: many manufacturers in Asia still handle trading partner communications via fax
and email while suppliers in North America and Europe have utilized EDI for decades. As
technology matures, suppliers in emerging markets may skip EDI altogether and move to a
more modern API driven approach to communication just as developing countries have
skipped land lines in favor cell phones.
Supply chain practitioners need to ask if their enterprise technology is prepared to handle
these diverse forms of communication that arise from Globalization, and build a business
case to stay prepared.
Key Issue #2: Fast-changing Markets
According to EduCBA, consumer behavior is affected by cultural, social, personal, and
psychological factors that are quickly being changed by technology and globalization. Social
media is creating new pressures for consumers to conform while putting pressure on
enterprises to utilize these sources of information to respond to changing preferences in order
to stay interesting and relevant.
Like globalization, the fast-changing consumer market also brings with it supply chain
management challenges:
First, products have shorter life cycles due to rapidly changing market demands. Enterprises
are under pressure to keep up with the latest trends and innovate by introducing new
products, while keeping their total manufacturing costs low because they understand that
trends will not last for a long time. This also demands a flexible supply chain that can be
utilized for manufacturing other products and for future projects.
Second, aside from new products, companies also need to constantly update product features.
Enhancing product features requires enterprises to redesign their supply chain to
accommodate product changes.
Finally, innovation presents a challenge in forecasting demand for new products. The
constant innovation necessitated by fast-changing markets also means enterprises will
constantly have to anticipate demand for new products. Enterprises need to create and
maintain an agile supply chain that can respond well to spikes and dips in demand and
production needs.
Companies should be asking if they have all the data needed to make planning decisions to
address challenges created by fast-changing markets. For example, if stated lead times from
suppliers are longer than actual times, this will lead to higher inventory levels than are
actually required and affect costly decisions around network planning and optimization.
Omnichannel retail has created silos of sales data that have to be blended and harmonized to
detect demand signals earlier in the planning process as well.
Key Issue #3: Quality and Compliance
Aside from influencing consumer behavior, social media highlights the importance of having
high-quality products. According to research conducted by eMarketer, reading reviews,
comments, and feedback is the top social media activity that influences online shopping
behavior. Furthermore, social media has not only raised consumers’ expectations of product
quality, but has also amplified the damages caused by product recalls. Thus, enterprises are
under increasing pressure to create high-quality products and to create them consistently.
They can do so by addressing quality at every level of the supply chain, such as raw materials
procurement, manufacturing, packaging, logistics, and product handling.
Product quality often goes hand-in-hand with compliance. Enterprises need to ensure that
they meet local and international regulatory standards in manufacturing, packaging, handling,
and shipping of their products. Aside from passing quality control and safety tests, enterprises
are also required to prepare compliance documents such as permits, licenses, and certification
which can overwhelm them and their supply chain management systems.
Emerging capabilities like IoT, Smart Packaging, and Blockchain are changing how
compliance is enforced and measured. However, these innovations will produce streams of
data that can’t be handled with the enterprise technology of the past 20 years. Managers
should carefully consider where these investments make sense and asking IT if the business is
utilizing platforms based on micro-services and big data to support these heavy data lifting
requirements.
Overcoming Supply Chain Challenges with Data Management and Integration
At the core of all these supply chain challenges, from globalization to compliance, is the need
for better data management and integration.
Faced by global operations, market expansions, and stricter quality and regulatory standards,
enterprises are getting overwhelmed by massive amounts of information coming from
different suppliers and customers in varying geographic locations that they need to properly
manage. This includes data from every stage of the supply chain such as pricing of direct and
indirect materials, labor agreements, rental contracts, tax documents, freight bills, and
compliance certificates, among many others.
Data management and integration is key to solving these challenges by connecting the
manufacturer’s supply chain management systems with those of their suppliers and partners.
Data management and integration give manufacturers much-needed visibility and control
over all of their supply chain processes such as procurement, manufacturing, storage, and
logistics.
Raw information coming from suppliers, partners, and even customers are also often
composed of both structured and unstructured data which makes it even more difficult for
enterprises to consume, analyze, and generate insights from these disjointed pieces of
information. Proper data management and integration transform these raw information into
compatible formats required by different supply chain management systems to ensure their
seamless flow.
Data management and integration address supply chain management challenges at the most
basic level of the value chain and in every activity. Furthermore, providing visibility not only
to manufacturers, but also to suppliers and partners can potentially improve trust and long-
term relationships.
Direct cost:
A direct cost is a price that can be directly tied to the production of specific goods or
services. A direct cost can be traced to the cost object, which can be a service, product, or
department. Direct and indirect costs are the two major types of expenses or costs that
companies can incur. Direct costs are often variable costs, meaning they fluctuate with
production levels such as inventory. However, some costs, such as indirect costs are more
difficult to assign to a specific product. Examples of indirect costs include depreciation and
administrative expenses.
Transhipment:
Transshipment (sometimes also trans-shipment or transhipment) means the unloading of
goods from one ship and its loading into another to complete a journey to a further
destination, even when the cargo may have to remain ashore some time before its onward
journey.
Factors to be considered while choosing a supplier:
Think strategically while selecting suppliers. Effective suppliers tailor their services to
your requirements. Determine the number of suppliers you require; a focused group
provides greater control. Consider dependability, quality, value, service, and financial
stability variables. Recommendations, directories, and trade groups all aid in the
identification of possible suppliers. Choose suppliers based on their ability to meet your
demands, not just their pricing. Negotiate contract conditions with the chosen supplier.
Ensure you understand your needs, seek guidance, run credit checks, and consider
variables other than price. Establish service levels in advance. Identify alternate sources,
especially for strategic requirements.

Sourcing and Procurement Outsourcing

Many companies choose sourcing and procurement outsourcing to enhance efficiency and
reduce costs in today's dynamic business landscape. Outsourcing procurement processes
can provide access to specialised expertise, improve supplier relationships, and streamline
 operations. Outsourcing should align with your organisation's strategic goals and
objectives.
For organisations on the digital transformation journey, agility is key in responding to a
rapidly changing technology and business landscape. Now more than ever, it is crucial to
deliver and exceed on organisational expectations with a robust digital mindset backed by
innovation. Enabling businesses to sense, learn, respond, and evolve like a living
organism, will be imperative for business excellence going forward. A comprehensive, yet
modular suite of services is doing exactly that. Equipping organisations with intuitive
decision-making automatically at scale, actionable insights based on real-time solutions,
anytime/anywhere experience, and in-depth data visibility across functions leading to
hyper-productivity, Live Enterprise is building connected organisations that are innovating
collaboratively for the future.
A demand-driven supply chain identifies customer demand signals. Then, it transmits those
replacement demand signals to retailers and suppliers in real-time so that the demand can be
acted upon instantly. However, if this supply chain planning process is not implemented,
firms tend to overplay by pacing up their production levels or slowing down. This can lead to
varying inventory levels, with the impact being unreasonable and inefficient.
Benefits of demand-driven supply chain in retail
Demand-driven supply chain benefits all the entities involved in the supply chain, from
suppliers to retailers, manufacturers, and the end consumer. Here are a few benefits
mentioned below:
 A more effective way to meet customer, partner, and investor requests
 Business continuity with a defined process like a demand-driven supply chain
 Achieving greater short and long-term visibility
 Power to respond quicker to in-demand changes
 Reduced working capital
 Accurate forecasting
 Decreased transportation costs
 Optimizing the current structure
 Order-expediting expenses can be cut down
 Reduced headcounts like planners and buyers
 Lost sales can be checked
 Increase in end consumers satisfaction
Effective ways of demand-driven supply chain management in retail
 Let us consider some of the ways of demand-driven supply chain management in retail
that help businesses to respond to consumer demand signals on time.
1. Real-time supply chain planning
When dealing with spreadsheets and ERP systems for planning, the organizations may rely
on historical data, which lessens the adaptability factor. However, it is not at all a worry as
one can follow the holistic method of supply chain management by using the TradeEdge
platform as it is a real-time supply chain solution. Moreover, it offers accurate forecasts with
its Demand Sensing solution.
2. Unifying supply chain planning with enterprise planning
The next move is to link the traditionally siloed supply chain planning to operations, sales,
and financial planning by orchestrating the short-term operational planning with the broader
business planning activities so that one can make real-time updates to inventory estimates and
supply. Connecting the planning processes allows business-wide collaboration.
3. Anticipating the consumer demands
Most companies face the challenge of foreseeing what the customers want, when, and where
they want? Again, this is where an efficient platform like the TradeEdge does the job with
ease, as it allows end-to-end visibility across the supply chain by receiving the demand
signals from the consumers. This enhances lead-time, profitability, and margins.
4. Leveraging real-time data across supply chain
It is normal to see models become large and difficult to decipher, primarily because
spreadsheets are the main planning tools. Thus, by integrating an efficient platform,
TradeEdge can manage high volumes of real-time data. It helps in planning more accurately
with minimum threats of over or under-stock inventory.
5. Be accommodating enough to cope with change
Replacing old technology with the latest one has become the norm in the transformational
world. Hence, to leverage investments, organizations should redesign the complete process to
exploit all the new available prospects by embracing an effective demand-driven supply chain
management platform like the TradeEdge.
Cross docking:
Cross-docking is a method for distributing products more efficiently without needing to store
them in warehouses for long periods of time. Incoming goods are received and sorted at a
cross-docking facility and then loaded directly onto outgoing trucks for shipment.
Grocery Industry:
Grocery with its high touch and frequent interactions is the leading sector in this survey.
Supplier selection is increasingly being shaped by key shifts as online becomes core, value is
sought again (price sensitivity), and consumer lifestyle agendas drive a focus on health,
sustainability, and convenience.