We are now in an unstable social situation with a series of natural disasters, tensions between nations, and a global epidemic of infectious diseases. Under these circumstances, how should a company manage and operate its supply chain to continue stable production and supply? This article describes the supply chain and how to manage it.
Table of contents
- What is a supply chain
- What is Supply Chain Management (SCM)?
- What is Supply Chain Risk Management (SCRM)?
What is a supply chain
What exactly is a “supply chain”? First, I will explain the meaning of the supply chain and its importance.
Meaning of supply chain
Supply chain means “chain of supply”. Before a company makes a product and delivers it to the customer, it is necessary to go through a complex logistics process that includes external contractors (suppliers), such as raw material procurement → manufacturing → distribution → sales. A supply chain is a series of these processes.
Difference between supply chain and value chain
A word similar to the supply chain is the concept of ” value chain “. This term stands for “value chain”. The supply chain refers to the process of producing and distributing products, including transactions with suppliers, or the logistics of bringing products to market. On the other hand, the value chain refers to corporate activities that maximize product value to acquire a competitive advantage.
For example, the construction of a good supply chain contributes to the improvement of product value (value chain) in that a stable supply can be expected. But there are of course other ways to increase the value of your products, and they involve activities outside the supply chain, such as marketing and after-sales service. In this way, although the supply chain and value chain are not unrelated, they are concepts with different points of view.
Why you should think about your supply chain
Why is the supply chain considered to be a very important factor in corporate activities?
As mentioned earlier, the supply chain is directly related to the stable supply of products. A well-managed supply chain ensures you get what you need, in the quantity you need, when you need it, optimizing costs while avoiding stockouts and excess inventory.
On the other hand, if this is not done, the storage cost of surplus inventory will be high, disposal loss will occur, and the production line may have to be stopped due to a shortage of necessary parts. In fact, during the COVID-19 outbreak, factories were closed due to clusters, and semiconductor shortages caused supply chain disruptions, product delivery delays, and supply shortages.
In this way, supply chains can be expected to have a positive impact if properly managed, but they also present challenges and risks, so once they are built they cannot be left unattended. It is for this reason that companies must always think about optimizing their supply chains.
What is Supply Chain Management (SCM)?
The implementation of ” supply chain management ” is important in optimizing the supply chain. In the following, we will explain the outline and points.
Meaning of supply chain management (SCM)
It refers to a method or approach to systematically and continuously streamline and optimize the supply chain. It is sometimes abbreviated as SCM because it is written as “Supply Chain Management” in English. By improving the supply chain through SCM, we can expect to expedite supply and optimize and optimize personnel and inventory management.
Points of Supply Chain Management (SCM)
SCM is implemented along the following points.
Examination of issues and measures
Point 1 is the examination of issues and measures. In SCM, careful planning is essential to build a stable distribution system and optimize costs. To formulate an effective plan, it is necessary to first review the entire existing supply chain of the company, analyze where the bottleneck is, and formulate improvement measures.
The second point is the development of a system for related companies and parties. When working on SCM, it is necessary to comprehensively consider processes such as ordering, receiving, inventory management, and invoice processing, deepen cooperation with suppliers, and work to create a strong system, including determining the person in charge. increase.
Point 3 is the introduction of IT systems. The use of IT tools is essential for managing complex supply chains down to the smallest detail. Recently, a method called “ autonomous supply chain ” has appeared, which entrusts the management and operation of the supply chain to AI. Since SCM systems have their characteristics for each product, including the form of implementation, it is important to clarify the requirements of your company before proceeding with product selection.
What is Supply Chain Risk Management (SCRM)?
“Supply chain risk management” is as important as SCM. Let’s take a closer look below.
What does Supply Chain Risk Management (SCRM) mean?
Supply chain risk management is risk management in the supply chain. The abbreviation “SCRM” is used because it is written as “Supply Chain Risk Management” in English.
As I mentioned earlier, there are many risks in the environment surrounding the supply chain. Especially now, supply chains are becoming unstable due to intensifying uncertainty due to external factors such as a series of natural disasters, tensions between countries, and the COVID-19 pandemic.
To respond quickly to such risks, it is important to anticipate what kind of troubles may occur and consider countermeasures against those risks (BCP countermeasures), rather than taking action after the risks materialize. Yes. SCRM stands for just that effort.
Examples of risks assumed in supply chain risk management (SCRM)
So what are the specific risks that should be assumed in SCRM? Below are some examples of major risks.
The first thing to consider is the risks associated with operations when managing and operating supply chains. This risk can range from technical issues such as system failures to human error such as ordering errors, or accidents and incidents such as in the delivery process.
Information security risks
The second thing to consider is information security-related risks such as malware, unauthorized access, and internal fraud. In the case of the supply chain, information security risks must be considered not only from the company’s own but also from other companies. For example, there is a risk that information about your company may be leaked from a supplier with vulnerable security, or that your company may be targeted using that information as a stepping stone.
Risks related to disasters and infectious diseases
We must also consider the risk of supply chain disruptions due to external factors, such as disasters such as earthquakes and floods, and infectious disease pandemics. Also, if you are building a global supply chain, tensions between nations may have an impact. The occurrence of risks due to such external factors cannot be prevented by our efforts alone, but in any case, it is necessary to consider countermeasures.
In addition to cyberattacks that are becoming more sophisticated year by year, the situation is unstable due to epidemics of infectious diseases and tensions between nations, and there is a strong need for appropriate management of supply chains. Microsoft Dynamics 365 gives you greater visibility into your supply chain and helps you better manage it. Please use it when working on SCM and SCRM.