We’re offering you a multi-article format to explore the vast subject of the supply chain.
This first article aims to define what the supply chain is, how it is structured and what the challenges are.
INTRODUCTION
The supply chain is an essential, if not vital, element for any company involved in the production or distribution of products for sale.
The globalization of the economy, the emergence of online sales and, more specifically, omnichannel sales, as well as the new demands of customers around the world, have all had a major impact on the evolution of the supply chain.
The COVID pandemic episode revealed just how important this is, and more than ever, supply chain efficiency is a major growth driver for companies. Companies therefore need to establish a commercial strategy that takes the supply chain into account, and to invest continuously to meet two main objectives: to control their production costs, while delivering a high level of service to their customers.
But how do we define the supply chain?
There can often be confusion between logistics and supply chain. Without speaking of differences, we can agree that logistics is part of the supply chain. To summarize quickly:
- Logistics, as we can approach it, is most often distribution logistics, integrating logistics platforms, warehouses, and of course, transportation.
- Supply chain refers to the entire supply chain. In fact, it is multidimensional and encompasses all the steps involved in the customer order, from production to storage, ending with distribution to the end customer.
The supply chain includes several stages which, beyond certain specificities, follow the same pattern:
Procurement : Acquisition of raw materials and products required for production or sale.
This involves managing suppliers, contracts and supply costs.
Production: Transformation of raw materials or components into finished products.
This involves production planning, inventory management and quality control, through the coordination of several links in the supply chain.
Logistics: Everything to do with transport, storage and physical management of products.
This includes management of warehouses, stocks, transport planning, monitoring of receipts and dispatches, and cross-docking.
Distribution: This involves making products available to end customers through a network of carriers.
This involves the management of carriers, their type (road, sea, air, last mile), routes, coordination of dockside loading and customer returns.
Customer service: everything to do with after-sales service, from handling customer requests/complaints to processing them.
This involves managing returns, applying the customer satisfaction policy, and refunding, replacing and handling returns.
In correlation with these stages, the supply chain also involves several types of flow:
- Physical flows
- Information flows
- Financial flows
- Administrative flows
SUPPLY CHAIN MANAGEMENT: SCM
In a nutshell, the supply chain covers all the logistical flows of a company, its suppliers, carriers and customers.
The management of all these flows, in a spirit of collaboration between the various players involved, must allow us to achieve the following objectives:
This is precisely where SCM comes into play, with its major role being to supervise physical, information and financial flows, and to orchestrate all the players involved in meeting these crucial corporate challenges.
SCM is a concept that can be represented by a suite of tools operating at different levels of the supply chain.
These tools, in addition to supervision, must also integrate analytics and intelligence, in order to offer continuous diagnostics with a view to improving, optimizing, predicting and reducing supply chain risks.
SCM tools are divided into 3 main areas: APS, ERP, SCE.
The SCEM part is best seen as a transverse layer of control and notification of the SCE layer.
APS supply chain planning tools
Their role is to plan and optimize the supply chain.
They include :
MRP: Material Resources Planning
Role in managing production planning, traceability and inventory optimization to reduce risk.
It is usually an integral part of ERP.
SRM: Supplier Relationship Management
Its role concerns all relations with suppliers, through a supplier portal to improve visibility of the supply chain, or to continuously assess supplier performance.
SCE supply chain execution tools
Their role is essential, as they are responsible for communicating information on physical flows and optimizing the execution of tasks between the placing of an order and its delivery to the end customer.
They include :
MES: Manufacturing Execution System
Linked to the MREP, its role is to control production as close as possible to real time. It collects data to manage traceability, quality control, production scheduling and production tool maintenance.
OMS: Order Management System
OMS plays an essential role at the sales stage, optimizing the management of customer orders from different sales channels. It also acts as a real-time inventory repository, providing the intelligence needed to optimize deliveries in conjunction with the WMS.
WMS: Warehouse Management System
Its role is to manage warehouses, whether from a physical point of view (organization of product storage), a human point of view (management of pickers, dockers, etc.) or a process point of view (reception, dispatch, quality control processes, etc.).
In some cases, warehouses may feature fully robotized reception, storage and picking zones. In such cases, the WMS relies on an intermediary, the WCS (Warehouse Control System), to give orders to the robots (conveyors, stacker cranes, etc.).
YMS: Yard Management System
Its role is to manage rotations on the receiving and shipping docks, working closely with the carriers to indicate which dock at which time, and to supervise the stocks concerned at each rotation.
TMS: Transport Management System
Its role is to manage the fleet of carriers responsible for both inbound (supply) and outbound (dispatch) shipments to and from warehouses. This solution also tracks shipments and relays information on the progress of deliveries.
DMS: Delivery Management System
Its role is similar to that of a TMS, but it is most often specialized in “last-mile” delivery, using vehicles adapted to high-traffic areas and more restricted access to private homes or relay points.
SCEM supply chain event management tools
These are tools that report and alert on incidents throughout the supply chain, in order to avoid bottlenecks.
In most cases, each of the solutions described above includes a built-in event management function, so as to be able to rapidly report any problems at its own level.
TO CONCLUDE
The supply chain is a complex mesh of collaborative tools for supervising, executing and optimizing the processes leading from the manufacture of a product to its sale to the end customer. It’s a vital link in the chain, ensuring a company’s profitability and customer satisfaction.
The diagram below is a simplified representation of what a supply chain can be. It is not exhaustive, as we could have added satellite tools such as PLM, MDM, PIM, etc., which can contribute directly or indirectly to the supply chain.
In upcoming articles, we will revisit some of these tools in more detail to better understand their scope, function, and interactions at the heart of the supply chain.
