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