What Is Supply Chain Management and Why Is It Important?

Supply change management aligns product supply and customer demand. It is an important aspect of any business because ensuring a good balance between supply and demand means you can be cost-effective, offer good customer service, and provide quality and consistency.  

If you enjoy looking at the bigger picture and have a knack for helping companies run efficiently, you may make an excellent supply chain manager. Before deciding if this is the right career path for you, you must learn what this role entails, the critical elements of supply chain management, and which industry sectors might be the best fit for you.

What is supply chain management?

Supply chain management is as it sounds: managing the supply chain for a company or organization. This entails everything from sourcing the raw components for a product to delivering the final result directly to the consumer. Part of working in supply chain management is figuring out how your company can maximize productivity, sustain production, grow within the market, and provide the most convenient experience for the customer.

Supply chain managers have two key responsibilities. The first is that customers can obtain the product. When a customer orders a product or goes to a store searching for it, it is in the company's best interest to have it available. Because of how competitive the consumer market is, customers are much more likely to buy a competitor’s item than to wait for a particular product to restock. In addition, if a customer orders an item online and it takes a long time to arrive (or worse — it never arrives), they will be less likely to order from the same company again. 

The second key responsibility of supply chain management is to manage the supply chain that brings the product to the customer. This involves sourcing the materials, finding a manufacturer, finding a delivery service, and offering convenient returns. Having a supply chain that maximizes productivity and efficiency gives the company opportunities to expand and keeps revenue flowing.

Read more: A Look at Product Lifecycle: Management, Tools, Careers

How does supply chain management work?

Supply chain manager responsibilities typically include five critical areas of work: planning, sourcing, organizing, delivering, and managing. Each area has specific tasks for the supply manager.

Planning the supply chain network. Before solidifying any contracts with suppliers or putting the product on the market, you carefully plan each “link” in the chain. You want to ensure that the transition between steps will be seamless and that every stakeholder knows their responsibilities. Another aspect of this is efficiency. If one component of the supply chain lags behind the others, it creates a “kink” in the chain and slows the entire production. This can delay the product getting to consumers and create downstream difficulties in production.

Sourcing materials. The next component is sourcing the materials needed for the product or service. This involves determining the supplier, figuring out how much of the supply to order, keeping track of the supply, and paying the suppliers. You also want to ensure your supplier meets the regulations needed to continue producing the product and ensure it is safe for the consumer. To keep product prices in the anticipated range, supply chain managers pay attention to any price changes and keep an eye on the pricing of alternative suppliers. 

Organizing manufacturers. The next step is to find the proper manufacturer for your product. This organization, company, or person turns the raw materials into the end product. Supply chain managers arrange quality testing to ensure each product meets the expected standard, potentially from an outside organization. The manufacturer is in charge of packaging the products and handing them off to the delivery service. In this space, it’s essential to manage communications between material sourcing, manufacturing, and delivery. These three components need an established flow to keep production moving.

Delivery of the product. Next is managing the delivery of the product. Supply chain logistics are an essential consideration. Whether you deliver to retailers or the customers’ homes, the delivery service must be reliable and effective. Having damaged products, delayed delivery, or incorrect orders can damage the company's reputation and cause a loss of customers.

Managing return services. If a customer is unhappy with the product or would like to exchange it for an alternate one, it is essential to have an effective and convenient return service. This reduces product waste, as other customers can receive the returned items.

What are the key elements of supply chain management?

Supply chain managers have diverse responsibilities and a wide range of job duties. While the exact job description will vary depending on the company and type of industry you work in, key elements of a supply chain manager career typically include:

• Continually integrating new information and data into your company’s supply chain processes.

• Managing communication between supply chain sectors

• Protecting and managing supply chain data

• Reducing human error with strategic planning

• Planning for future obstacles and developing creating solutions

• Provide accurate information to company employees

• Reducing supply chain costs and maximizing revenue

• Simplifying the supply chain as able

• Integrating new technologies into supply chain functions

Why is supply chain management important?

Effective supply chain management is important for all companies that distribute goods, services, and products because supply chains can quickly break down and delay production. This creates internal stress in the company and a loss of revenue. It can also lead to detrimental customer loss and a lower company reputation. Certain suppliers and manufacturers are particular about the types of companies they work for, so having a solid company reputation with reliable key players will help to secure beneficial supply chain partners.

As a supply chain manager, you are one of the key people responsible for promoting business sustainability and positive experiences for customers. This is essential for the business's productivity and the company's success. Supply chain management plays a key role in staying on top of the market and sustaining a loyal customer base. According to a survey conducted by Deloitte, almost 80 percent of businesses with high-functioning supply chains performed better than their competitors [1]. 

Supply chain management use cases

Supply chain managers use many types of software to manage different components of the supply chain and keep things running smoothly. In this career, you have the exciting task of finding new and useful technologies to help the company expand. As the product, market, or company grows, you can integrate more advanced software systems to keep track of large volumes of data. Building your technical skills can help you build the knowledge base to manage large projects and add value to your company team.

Automatic Requisition Tracking Management Information System (ARTMIS) is one such platform. Developed by IBM and Chemonics, ARTMIS is a common system that tracks shipments throughout the supply chain. This allows supply chain managers to schedule shipments up to two years in advance and promote long-term coordination of the supply chain elements. 

Another growing use case of supply chain management is integrating artificial intelligence (AI) and machine learning. Platforms such as BASF use these concepts to help supply chain managers make informed decisions, improve current systems, and track progress over time. 

As a society, we are in an exciting era of technological development. As your experience in supply chain management expands, you’ll quickly learn to use your creative and problem-solving skills to design innovative supply chain systems that use new technologies to improve function and efficiency. This creative thinking process serves to help you stay ahead of the competition and keep your organization at the top of the market.

Read more: What Does a Product Manager Do? And How to Become One

Next Steps

Are you interested in exploring supply chain management further? One way to do this is to learn more about this career and explore potential professional opportunities. An introductory course or specialization on Coursera can help you understand the basic skills needed to enter this industry and determine whether this career is the right fit for you. The Supply Chain Management Specialization or Supply Chain Logistics course by Rutgers the State University of New Jersey is a great resource to take your first steps. 

specialization

Supply Chain Management

Supply Chain Management. Master the Fundamentals: Logistics, Operations, Planning, Sourcing, and Strategy

4.8

(10,917 ratings)

142,974 already enrolled

BEGINNER level

Learn More

Average time: 6 month(s)

Learn at your own pace

Skills you'll build:

Forecasting, Logistics, Supply Chain, Lean Six Sigma, Supply Chain Risk Management, Warehouse Management, Logistics Planning, Inventory, Six Sigma, Microsoft Excel, Planning, Demand Forecasting, Sourcing Best Practices, Strategic Sourcing, Supply Chain Sourcing, Supply Chain Strategy

course

Supply Chain Logistics

Have you ever wondered how goods get delivered to us so quickly as soon as we order them? One word: Logistics! In this introductory Supply Chain Logistics ...

4.8

(9,649 ratings)

216,695 already enrolled

BEGINNER level

Learn More

Average time: 1 month(s)

Learn at your own pace

Skills you'll build:

Warehouse Management, Logistics Planning, Supply Chain, Inventory