The invisible chain: how supply chains are really running behind the scenes

Supply chains are pretty much always in the background, until something goes wrong. Delayed deliveries, missing stock, unexpected costs - suddenly the supply chain is front and centre and everyone's pointing fingers.

But at its heart, supply chain management is actually the story of how a business makes all these different parts talk to each other - from getting the raw materials through to getting the finished product out the door. It's all about how you plan, source, produce, store, move, distribute and deliver your products, along with all the information, data and financial transactions that go along with it. When it's all working smoothly, supply chain management hums along quietly without anyone noticing - connecting all the right people, systems and processes into one seamless flow.

For any business in manufacturing, warehousing or retail that's big enough to need SAP or is planning to move to SAP S/4HANA, supply chain performance is crucial because it directly impacts what you spend, how accurate your stock levels are, whether you can meet your delivery promises, and ultimately how happy your customers are. The bits that follow are going to break down the different bits of the supply chain, the role of inventory and visibility, the common supply chain problems, the ongoing support that's needed, and how SAP helps with day to day supply chain operations.

What supply chain management is all about

At its simplest, supply chain management is all about getting the right products to the right customers.

To do this, it needs to connect:

• Getting the raw materials in

• Making the stuff

• Storing and managing the stock

• Getting it to the customer

It also needs to handle the flow of:

• Information

• Data

• Money

So supply chain management is both about the day to day operational stuff - and about making all the different parts work together.

The key bits of the supply chain

A typical supply chain can be broken down into a few core stages.

Planning

You forecast what your customers are going to want and make sure you've got enough to meet that demand as part of your supply chain management. This is what really sets the scene for everything else.

This includes:

• Working out how much you think you're going to sell

• Figuring out how you are going to meet that demand

• Planning your stock levels

By using tools like AI and machine learning, you can actually make better guesses at how much you're going to sell by looking at what happened in the past, and be able to plan production schedules that are a lot more accurate.

Sourcing

You get the materials you need from suppliers.

This involves:

• Choosing who you are going to buy from

• Placing orders with them

• Keeping track of how they're performing

In global supply chains, sourcing decisions need to balance cost, quality, timing and compliance across the whole supply chain.

If you do this right, you'll be able to get the supplies you need on time and on budget.

Production

You turn the raw materials into finished products.

This stage includes:

• The stuff that happens in the factory

• Checking the quality of what you're making

• Scheduling production

This all relies on accurate stock levels, clear production schedules and coordinated supply chain operations.

Warehousing and inventory management

You store and manage the products before they go out.

This involves:

• Keeping an eye on how much stock you have

• Making sure the warehouse is running smoothly

• Being able to see what you've got in stock

This is where the physical stuff meets the digital world - helping you avoid too much stock and make the supply chain more efficient.

Distribution and logistics

You get the products to the customer.

This includes:

• Planning the transport

• Working out the best route

• Delivering the goods

This stage is where logistics management coordinates all the different bits needed to get the product to the customer on time.

Customer delivery and service

The final stage is making sure:

• Orders are fulfilled

• Delivery promises are kept

• Customers are happy

This is also where you can get feedback from customers to help improve service and stop problems happening again in the future.

Why supply chain management matters

Supply chain management affects almost every part of the business.

When it works well:

• Costs are under control

• Inventory levels are balanced

• Delivery is on time

• Customers are happy

This all sounds pretty straightforward - and it is. By managing the supply chain properly you can save money, improve service, and be more resilient.

When it doesn't:

• Orders get delayed

• Inventory gets out of whack

• Costs go up

• Teams resort to manual fixes

Supply chain performance is often a clear sign of how well a business is running. And if you can get supply chain management right, you can gain a real competitive edge - and companies with top class SCM are a staggering 23% more profitable.

The role of inventory in supply chain management

Inventory is right at the heart of the supply chain.

It acts as a buffer between:

• Supply and demand

• Production and delivery

Getting inventory management right means you can make sure you've got what you need when you need it, keep stock levels in check, and have a handle on working capital.

Too much inventory is expensive. Too little inventory is risky. Finding the right balance is a big part of supply chain management.

The importance of visibility

You can't manage what you can't see.

Visibility and supply chain transparency means knowing what's in stock, understanding demand and supply, and spotting any potential problems early on.

Technologies like blockchain can really help with this, by making it possible to keep track of where your products are, and preventing counterfeiting across the supply chain.

Without visibility, it's like trying to run a ship blindfolded - you can't steer, you can't navigate, and you can't avoid the rocks. Issues come to light early, not weeks or months after the fact

• Planning starts to get more solid

• Operations start to feel predictable

Visibility is what transforms a supply chain from one that's always playing catch up into one that's always one step ahead.

Supply chain management and technology

Today's supply chains are heavily reliant on supply chain management technology to drive that change.

Systems like SAP are what make it all work by:

• letting people get real-time data

• making it easy to integrate across different functions

• automating lots of processes

• giving everyone a clear view of what's going on

And new tools are coming along too that let you monitor the whole extended supply chain in real time - giving companies the power to make better decisions faster, and 5G technology is playing a role in making all this possible by allowing us to connect with all the devices in the supply chain, giving us that visibility.

This allows for:

• faster decision-making

• accuracy goes up

• it becomes a lot easier to handle big volumes

But here's the thing: technology alone isn't enough.

It's got to be aligned with how people work, the data you have to work with and the processes in place, otherwise you end up with systems that are part of the problem rather than part of the solution.

Common challenges in supply chain management

Most organisations are up against it when it comes to supply chain disruptions, and it's usually the same old problems that keep causing them.

They include:

• demand going up and down unpredictably

• suppliers taking too long to get the goods out

• stock levels getting out of sync

• systems are all over the place

• people having to use workarounds all the time

These problems don't usually appear out of the blue - they build up gradually over time. And if you don't have a clear plan in place for managing risk, they turn into a big problem. To tackle supply chain risk you need to be on top of it with some risk management - including finding alternative suppliers and planning for when things go wrong.

Why supply chains drift over time

Even if a supply chain is well designed, it's not going to stay that way forever.

Over time:

• volumes go up and up

• you're dealing with more and more different products

• people have to adapt processes on the fly

• the data gets messy

Unless you regularly take a hard look at how things are working and make changes:

• things start to fall out of sync

• performance starts to slip

• costs start to go up

Supply chain management needs to be a continuous process - you can't just fix it and then forget about it.

The role of integration

Supply chains involve loads of different systems, functions and connections with other supply chain partners.

Getting it all integrated is what makes it happen:

• data flows smoothly between systems

• processes are all working together

• decisions are based on up to date information

Without integration:

• things start to fall apart

• processes get slow and clunky

• visibility goes down the drain

But with integration:

• the supply chain starts to work as one system, across the whole supply chain

That's exactly where SAP comes in - helping tie everything together.

The importance of ongoing support

Just because the system is working well at the start doesn't mean it will stay that way.

It needs:

• continuous improvement

• keeping the data up to date

• making sure processes stay aligned

And Application Management Services (AMS) is what helps make sure that happens by:

• keeping the system running smoothly

• helping out when things change

• stopping performance from drifting away

This way you can be sure your supply chain stays effective as the business grows and changes.

How SAP supports supply chain management

SAP is what helps drive supply chain operations forward, by integrating planning and execution:

• getting planning and execution working together

• giving you real time visibility of what's going on

• connecting finance with the supply chain

• making it easier to scale up operations

ERP integration is also key to operations management - and gives supply chain pros the data they need to make solid decisions.

SAP consultancy is how you get the right processes in place - and AMS keeps all the systems running smoothly. Together they help you move from being reactive to being in control.

So, what does good supply chain management look like?

When supply chain management is working well, it's not just about getting things done efficiently - it's about making sure that the whole process is responsible too.

• inventory is accurate and easy to see

• processes are all running smoothly and consistently

• systems are all talking to each other

• decisions are based on solid facts

• customers are getting what they need

Modern supply chain management also includes a focus on things like sustainability and ethics - things like reducing our carbon footprint, cutting waste and conserving natural resources.

Companies are under increasing scrutiny on ESG initiatives - and governments are getting tougher on sustainability and ethics too.

The supply chain is no longer something that causes problems - it's something you can be in control of.

Glossary: supply chain management terms

Supply chain management - that's the coordination of all the bits that make up the supply chain - sourcing, production, delivery and more.

Inventory - that's the stock that's held in the supply chain to meet demand.

Logistics - that's the moving and transporting of goods - and that's a key part of the wider supply chain.

Integration - that's when all the different systems and processes start talking to each other.

Visibility - that's when you can see data across the whole supply chain.

Supply chain models - these are the frameworks that you select based on the business, the product and the patterns of demand.

Agile supply chains - that's when your supply chain is flexible and can deal with any disruption that comes its way.

Market demand - that's the signals that are coming from customers and the market that shape planning and fulfillment.

AMS (Application Management Services) - that's the ongoing support and optimisation of systems.

What's the difference between supply chain management and logistics management?

The latter is all about getting goods from one place to another and sticking them in a warehouse - whereas supply chain management is really about getting everything from suppliers right through to customers delivered on time.

Getting a bigger picture

Understanding supply chain management isn't just about separate processes pinging along. It's about understanding how everything fits together - from planning right down to inventory levels, warehouse space and logistics. It's the whole shebang. When it all works in harmony, life is good. When it doesn't, trouble pops up everywhere.

That's why getting supply chain management right is a game-changer for any business - and that's where we come in.