Supply chain is the global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution and cash.
At a high level, supply chain touches every step from growing, mining or creating a material to responsibly managing its end of life — and all of the activities in between: sales and operations planning, new product development and engineering, risk management, corporate social responsibility, and so much more.
Supply chain is such a far-reaching field that there is truly something for everyone. Below, you’ll find more information on some of the main functions and activities of supply chain management.
Orchestrate describes the activities associated with the integration and enablement of supply chain strategies. This includes business rules and enterprise business planning, human resources, network design and technology, data analytics, contracts and agreements, regulations and compliance, risk mitigation, environment, social, and governance initiatives, circular supply chain activities, performance management and more.
Plan describes the activities associated with developing road maps to operate the supply chain. Planning is executed for the Order, Source, Transform, Fulfill and Return processes, including determining requirements, gathering information about available resources, balancing requirements and resources to determine planned capabilities and gaps in demand or resources, and identifying actions to correct these gaps.
Order describes the activities associated with the customer purchase of products and services, including attributes such as locations, payment methods, pricing, fulfillment status and any other order data.
Source describes the activities associated with procuring, ordering, scheduling the ordering, delivery, receipt, and transfer of products and services.
Transform describes the activities associated with the scheduling and creation of products, including production, assembly and disassembly, maintenance, repair and overhaul, and more.
Fulfill describes the activities associated with executing customer orders or services, including scheduling order delivery, picking, packing, shipping, installing, commissioning and invoicing.
Return describes the activities associated with the reverse flow of goods and services, as well as any service components from a customer through the network in order to diagnose condition, evaluate entitlement, disposition back into Transform or other circular activities.
Demand management recognizes all demand for goods and services to support the marketplace and involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results. Achieving these goals involves weighing both customer demand and a firm’s output capabilities, then balancing the two. Demand management comprises planning, communicating, influencing, and prioritizing demand.
Supply planning considers the demand plan in order to determine the most efficient way to execute and fulfill manufacturing, procurement, distribution and logistics requirements. Balance is the overall goal with supply planning, and by constructing a robust supply plan by leveraging information from the demand plan, supply planning works to maintain the balance necessary for achieving maximum efficiency. Everything from production and inventory levels to scheduling and ship-from location identification is included in supply planning so that organizations are able to match demand at every stage.
Inventory management is the branch of business management concerned with planning and controlling inventories. The primary purpose is to achieve inventory accuracy, which is when on-hand quantities are within an allowed tolerance of the recorded balance. This important metric usually is measured as the percent of items with inventory levels that fall within tolerance. Target values are typically 95-99%, depending on the value of the item. For logistical operations (location management) purposes, it is sometimes measured as the number of storage locations with errors divided.
Procurement is an umbrella term for the business functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations. It incorporates a range of activities related to obtaining goods and services. The primary tasks involved with procurement enable supply chain organizations to obtain competitively priced supplies that deliver the most value to the business. In addition, procurement can encompass gathering business requirements, sourcing suppliers, tracking the receipt of goods, updating payment terms.
Manufacturing is a series of interrelated activities and operations involving the design, material selection, planning, production, quality assurance, management, and marketing of discrete consumer and durable goods. Programs and systems that participate in manufacturing shop floor control include programmed logic controllers and process control computers for direct and supervisory control of manufacturing equipment; process information systems that gather historical performance information, then generate reports; graphical displays; and alarms that inform operations personnel what is going on in the plant currently and what occurred during a very short history into the past.
Warehousing and distribution includes all activities related to receiving, storing, and shipping materials to and from production or distribution locations. Specifically, warehousing objectives comprise managing and optimizing workflows and the storage of goods within a warehouse. They also often encompass automated data capture and enterprise resources planning systems. A key process in warehouse operation is to ensure the correct product has been received, in the right quantity, in the right condition, and at the right time. Distribution comprises all of the activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer and the communications network necessary for effective management. It also includes all activities related to physical distribution, as well as the return of goods to the manufacturer.
Transportation and logistics functions encompass planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization. Management processes involve executing requirements for the planning, scheduling, and budgeting of transportation assets, services, and related systems of the shipping process through delivery. Logistics, specifically, is the subset of supply chain management that controls the forward and reverse movement, handling, and storage of goods between origin and distribution points.
Operations management is results-driven and exists to turn inputs into outputs in the most concise and efficient manner possible. By leveraging equipment, materials, manufacturing and human resources, supply chain organizations can decrease the amount of time or resources required to achieve this outcome while increasing their net profit. Operations management serves to increase efficiency, but the importance and benefits extend further. Operations management is crucial to any business as it enables effective management, control and supervision of goods, services and people.
S&OP plays a critical role in the success of an organization because it helps removes the element of surprise. A well-rounded S&OP strategy works to balance supply and demand is paramount by providing a single set of numbers from which to work and creating purposeful cross-functional involvement. S&OP is a key communication tool to keep supply chain organizations ahead of any potential bottlenecks.
The number of available supply chain jobs is close to a 20-year high. If you’re looking to start, advance or enhance your career, visit our Supply Chain Careers page. This resource features numerous resources, including tips on pivoting your career, course suggestions, job board and more.
