Hot topic: Supply Chain Management
What is Supply Chain Management (SCM)?
SCM is the process by which elements of a supply chain are centrally managed to ensure the efficient and effective use of resources. It refers to the entire end-to-end procurement cycle and represents a holistic approach to the running of an organisation. SCM requires clarity around procedures, processes and suppliers to ensure the smooth running of the supply chain. Effective Supply Chain Management enables companies to cut excess costs, improve productivity levels and increase product delivery times.
SCM can be divided into five elements:
- Strategy / plan
- Sourcing of raw materials / services
- Production / manufacturing, with a focus on efficiency and productivity
- Distribution, including logistics and courier services
- Returns
Alongside cost control and efficiency improvements, there are other benefits to effective SCM. It can ensure health and safety compliance, improve product quality, avoid expensive legal issues and improve customer service.
In recent years, supply chains have grown in complexity, with the majority of medium to large businesses relying on international supplier networks. Effective SCM is vital to ensure that costs are managed, and the business is operationally future-proofed.
SCM and COVID-19
The impact of the pandemic has added further layers of complexity to SCM. For example, although holding inventory has historically been seen as a waste of resources, today’s freight disruption may mean that businesses choose to build up stock levels in warehouses to minimise end consumer waiting times. Logistics teams may consider re-routing freight to avoid port delays. Fashion retailers may plan season launches months ahead of normal timescales to allow additional time for production in case of labour shortages or other issues that may slow down the supply chain.
If Covid-19 has taught us anything, it’s that SCM needs to be adaptable to a changing world.
SCM and Corporate Social Responsibility (CSR)
Supply chains have evolved in line with business and consumer priorities. For example, ethical demands on supply chain have become consumer-level news and are widely reported on in everyday news outlets. The level of public interest in these areas is high, and it is important for businesses to respond accordingly with policies and procedures that treat ethical sourcing as of at least equal importance to other factors like cost, efficiency and productivity levels.
Considerations include the avoidance of child labour, reducing carbon footprint and treating employees respectfully – including sub-contractors. Businesses have been called out by the media for claims such as they pay a living wage. This may be true for their permanent UK staff, however when, for example, sub-contracted factory workers in Asia are sometimes paid very poorly, working excessively long hours in challenging conditions to produce product, any business claim of being ethical is considered questionable at best.
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