What Is Supply Chain?
Often confused with logistics processes, the Supply Chain symbolizes the set of methods, concepts and ways of conducting operations and the flow of goods , from the producer to the final consumer.
Therefore, its activities necessarily start from the transformation industry .
Although other elements of the production chain also have an active participation, mainly distributors, it is in the industrial activity that the core of the operations is found.
Anyway, within the Supply Chain, we find the following actors:
All these characters enter the theater of operations in a strategic way , each playing an equally important role.
Therefore, they must be evaluated together and at the same time separately, in order to know the impacts that their actions generate and the costs involved.
Distributors are, in essence, those who make the supply chain happen .
Without their intermediation, the industry would hardly find the means to, alone, make its products reach the final consumer.
For this reason, it is essential to understand how they fit into the scope of Supply Chain Management, a concept that we will address in the next topic.
What Is Supply Chain Management (SCM)?
Considering the huge web represented by the supply chain, it becomes necessary to find tools that allow you to manage your processes from end to end.
Then comes the Supply Chain Management (SCM), a discipline that studies means to be applied in the management of operations .
Its complexity makes the use of technology indispensable, after all, it is not possible to conceive the management of interconnected operations and of different nature that do without the most modern resources.
Thus, Information Technology (IT) is, naturally, an ally since always.
Thanks to the resources it makes available, it is possible to integrate different distribution and marketing channels , materializing the sequence of logistical operations.
That’s what SCM is all about: integrating the various phases that make up the Supply Chain and that place it on a higher evolutionary level compared to logistics.
While the former is concerned with understanding the flows that start from the assembly lines, the latter has a more strict relationship, serving to delimit internal processes and without contemplating other areas of activity.
Examples Of Companies Using Supply Chain Management
SCM solutions are , over time, more and more modern.
Businesses of different sizes understood the importance of having a computerized supply chain management that follows technological developments and assertively meets internal and external demands.
Supply Chain Management became so essential that, annually, the Gartner consultancy began to publish a ranking of the 25 companies that stand out in this process.
In the most recent survey , the top five companies in the ranking were:
- Cisco Systems
- Johnson & Johnson
- Schneider Electric
Although they are not in the first positions, Walmart (8), Nike (13) and Coca-Cola (18) have successful cases that are worth mentioning:
It was one of the first companies in the world to implement delivery via drone , but the model still needs adjustments and improvements, as it can only support loads of up to 3 kg and fly distances of up to 5.5 kilometers.
After investing in a solution that does predictive retail analytics and demand detection , the sportswear giant was able to streamline its logistics and guarantee customers within two days of delivery to its Los Angeles headquarters.
In addition, Nike already has the radio frequency identification system (RFID) in almost 100% of its products, which helps the brand to have a better management of its stock, for example.
Large-scale implemented distributed ledger technology (DLT) , which became famous for its use with cryptocurrencies , and has blockchain as its best-known model.
In practice, DLT is a data storage system that, in the case of Coca-Cola, is used to optimize transactions between beverage suppliers and bottlers.
How Important Is The Supply Chain?
Without a well-structured supply chain, it would be impossible to maintain the standard of living as it is today, nor to provide access to goods and services.
As we have already highlighted, the concept of Supply Chain is linked to logistical processes, although it is not restricted to this type of operation.
It is not surprising, therefore, that the main focus of the activities it encompasses is on transport.
Distributing goods is perhaps the most important phase in the integration of production channels.
That is why the costs of distribution, in some cases, are even higher than those of production itself.
For wholesalers, but especially for retailers, the lower the perceived costs with intermediaries, the greater their competitive advantages .
However, it is not always possible to eliminate the agents that make it possible for industrialized products to reach the final consumer.
Almost as a “necessary evil”, it is up to the trade to overcome the daily challenge of finding cheaper ways to operate and that involve minimal risk .
What Areas Does The Supply Chain Cover?
The multidisciplinary that characterizes the Supply Chain is evidenced by the different areas, elements and specialties that make up its stages.
In this sense, we can highlight:
- modes of transport
The interdependence of each of these areas is what makes the Supply Chain an extensive network, which, to be correctly interpreted, requires careful analysis of data and high analytical capacity .
Therefore, the supply chain cannot be conceived without understanding how transport modes are integrated with other agents.
Equally important is to contextualize human resources within the operations, developing new methods of training , improving and managing people , in order to optimize results.
The Benefits Of The Supply Chain For The Industry
Contrary to what many people may think, it is not just the larger companies, like the ones we brought up in the examples above, that stand to gain from the Supply Chain.
Any company can enjoy the advantages that a well-managed supply chain can bring, including yours.
Below are some of the main benefits that prove that this statement is correct.
Decreased Operating Costs
The Supply Chain helps to make processes more organized and one of the main consequences of this is to identify situations that can be done in another and better way.
For example, when a company decides to invest in an outsourced distribution center (DC) for its logistics operation instead of keeping an inventory on its premises, it cuts warehousing operational costs.
In addition, the change means that the useful life of the products is more respected, preventing them from being exposed for a long time in inappropriate conditions, which, in turn, would generate more expenses.
Often, cost cutting is not accompanied by service improvement.
Operating expenses are reduced, but there is no gain at the other end, which makes the manager question whether the change was, in fact, worth it.
With the Supply Chain it doesn’t work like that .
Optimizing processes is a two-way street, which includes cutting costs, yes, but also adding improvements.
Using the example of CDs again, changing the logistics procedure also makes shipments faster.
After all, the carrier or the team responsible for the sector will not need to look for the product among a series of other items in the warehouse, as the order will already be delivered by the supplier in a more direct way.
It is the summary of the two previous advantages.
When a company only cuts costs, it has savings.
When she continues to spend a lot but manages to improve her service, she has an upgrade level .
Now, when it combines savings with improvement, we have greater efficiency, which can be seen as the main objective of the Supply Chain.
It’s called continuous improvement.
As we have shown, several sectors are part of a supply chain, but this participation is useless if they are not integrated with each other .
The focus of any Supply Chain strategy must be multidisciplinarity.
These distinct areas need to complement each other as true links in a chain, so that a complex logic is not created, but aligned.
For example, if the logistics team does not pass the routes correctly to the transport team, there will be a problem with the delivery of the product.
That is, it is necessary to have a very fine-tuned communication between all the departments so that the problems are reduced.
Increase In Competitiveness
As the supply chain begins to become more efficient and the end consumer perceives the impacts of this change, the company stands out from the competition and new strategies can be traced.
The organization can plan higher flights and, based on good planning, taking into account different scenarios, take on new demands.
Maybe it’s time to increase your transport fleet? Or perhaps investing in a new factory in a strategic location?
An effective supply chain can allow for bolder goals .
It is common to want to look outside for growth.
After all, it is in the external environment that the customer is, the main reason for being of a business, and consequently who “sustains” the company.
However, in order to impact your audience, you must first look inward, and that is precisely what the Supply Chain proposes: an internal rearrangement to achieve goals in a more sustainable way .
By cutting expenses, renegotiating contracts with suppliers and bringing improvements in processes, the organization has a greater profit margin.
How Does The Supply Chain Work Within The Company?
The customer may not know it, but the product he buys goes through a series of processes before being delivered.
The company does not simply buy the merchandise and pass it on to the final consumer.
If she really wants to have control over the quality of her service and guarantee a good return, she needs to go further.
The first point is to know well what you are selling ‒ and here we are not only talking about the technical specifications, but also about the life cycle of the products.
Every product has a higher demand peak in a certain period of the year, for example.
Some are even seasonal or have a lower perishability, requiring greater attention.
There is still the relationship with suppliers , which needs to be guided by trust and have very transparent deadlines.
In other words, the Supply Chain within a company has its own complexities, but it is up to the supply chain management to know how to conduct these different stages.
Below, the path, from end to end, with the main phases of this process:
- Purchase of raw material for the production of the product
- Budget with suppliers to get the best offer
- product manufacturing
- Goods storage
- Order exchange or return
- Contact via Customer Service with consumers
- Receiving customer reviews and feedback .
Supply Chain And Logistics: What Is The Relationship?
We have already touched on the relationship between Supply Chain and Logistics, however, it is important to establish even more clearly the differences between each of the segments and how they are related in the operational context.
Although they seem to be, they are not synonyms , despite the fact that, in certain cases, their attributions are indeed similar.
A logistical process can be understood as all the one that consists of transporting materials or people from one point to another and the data related to this transport, as well as its subsequent storage.
The supply chain involves, in addition to transport, the entire strategic and intelligence part , which is fundamental for the success of operations.
All this applied to different areas.
It would be more or less as if logistics were one of the components of the Supply Chain , even though it can be seen as an autonomous specialty with its own dynamics.
Therefore, it is possible to understand the functioning of logistics operations without considering the supply chain, while the opposite would not be possible, given that logistics is an inseparable part of the Supply Chain.
Advantages Of Good Supply Chain Management
It is not news to anyone that a major challenge for wholesalers and retailers in general is reducing distribution costs .
This distribution involves multiple channels, each representing an operational cost that can be higher or lower, depending on the context.
The players involved need to deal with several obstacles , such as:
- Delayed and road-focused transport model
- Lack of investment in infrastructure
- Complex and extremely expensive tax system
- precarious road network
- High fuel cost
- Insecurity on roads and distribution points
- Lack of government support.
Thus, Supply Chain management becomes even more relevant, especially because the risks involved in the transport and storage of goods are high, especially in large urban centers.
In Rio de Janeiro, for example, an average of 23 cargo thefts are recorded per day , which inevitably increases the final price of products to the consumer.
However, the challenges are not limited to making operations less exposed to criminals..
Transport by road itself is not a problem, as long as it is carried out over short and medium distances.
In addition, the poor state of conservation of the roads practically makes road transport unfeasible in some regions.
Taking these problems as a reference, it becomes even more important to develop ways to efficiently manage the Supply Chain.
Whoever succeeds in overcoming them will certainly have an advantage over competitors.
How To Manage The Supply Chain (Supply Chain)?
Given the complexity of operations within the supply chain, managing it implies going beyond logistical processes , however important they may be.
When it comes to the Supply Chain, an even broader view of the processes and agents involved is necessary, which consists of:
- Purchase of materials and supplies
- Supplier detection and selection
- Product development and manufacturing
- Transport of goods and supplies
- Daily material flow management
- Coordinate interactions between suppliers, distributors and customers
- Establish and maintain effective communication channels.
Within the same company, different sectors must operate in synergy so that the stages of the supply chain can be carried out with maximum efficiency.
The main ones are:
A production and distribution network cannot be formed without qualified people capable of carrying out the many processes involved.
Therefore, an HR sector that is able to recruit, train and improve professionals to work in the Supply Chain is essential.
One of the most important sectors within the logistics operations included in the supply chain is inventory.
Adopting management tools that allow the control of the flow of stored products is the key to success, as it reduces operating costs , as well as losses due to perishability or low turnover of certain goods.
Another sector critical to the success of operations is marketing.
After all, it is the actions based on your strategy that can guarantee that consumers will reach the products and vice versa.
It would be an innocuous effort to produce and distribute goods without, before that, marketing has not “prepared the ground” for them to reach the final customer.
A well-trained sales force capable of overcoming objections is also very important in the context of the Supply Chain.
While marketing deals with more strategic aspects and not always of immediate application, it is up to the sales sector to make the direct connection with the consumer.
In short, it’s the professionals who are on the front lines .
Tax / Accounting
The weight of taxes and duties represents a hefty share of distribution costs.
Therefore, it is necessary to integrate the tax planning part of the operations into the operations , allied to accounting advice.
Last but not least, the purchasing sector is a decisive element in guaranteeing a higher profit margin .
It is the professionals in this sector who make direct contact with the distributors, therefore, they are also fundamental to define how profitable your sales will be.
Tips For Optimizing Supply Chain Management
Now that you know how Supply Chain management works, we have separated some tips so that your supply chain can undergo optimization.
Map The Supply Chain Steps
When you know exactly what’s going on at each stage of the supply chain, it’s much easier to see what’s working and what’s not.
By identifying bottlenecks, for example, it is possible to invest in improvements and, using predictive maintenance, prevent them from happening again.
Maintain Centralized Management
Although the participation of all areas involved in the Supply Chain is important, management still needs to remain centralized .
After all, when information is concentrated in one place, it is faster to find the diagnosis than what needs to be done.
Analyze Demands And Expenses
For those looking for operational efficiency, it is vital to periodically take stock of the company’s demands and expenses to analyze what can be cut to achieve the objective.
This is also the secret to optimizing processes and never forgetting, really, what the organization’s priorities are.
Monitor Internal And External Indicators
Don’t forget to look in and out.
Internal and external indicators are great parameters to check if your processes are as expected or if you need to make some kind of change.
Choose A Good Management System
Have technology on your side when choosing your Supply Chain Management system.
Opt for the one that brings a broad view , technical and intelligence reports of all stages of your chain.
Keep The Team Engaged
Even though technology is gaining more and more space in the Supply Chain ‒ we will talk about this later ‒ people still play a key role in the efficiency of processes.
Each member has its role and importance within the chain.
Integrate All Areas Of The Company
It is important that all sectors involved in the Supply Chain receive real-time information on the progress of processes.
For example, when a delivery is made, it is important that the carrier receives this information, but so do suppliers, manufacturers and other professionals.
Integrate Supplier Data
So that you do not have any problems with the quality of your service, it is essential to have an integrated database between your company and suppliers.
Thus, both are able to have greater control of the step by step of each demand.
What Are The Main Supply Chain Challenges?
Operating in the Supply Chain is, regardless of region, country or state, an immense challenge.
By land, we are talking about a distance of almost 4 thousand kilometers.
This is, without a doubt, an immense obstacle to be overcome, aggravated by the already mentioned precariousness of the roads, insecurity and even the high cost of tolls .
Operating in the midst of so many difficulties makes the Supply Chain professional an extremely valued and requested figure by companies, from SMEs to large corporations.
No wonder, after all, the challenges that this specialist must deal with on a daily basis are not simple.
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An Overview Of The Market In The Supply Chain Sector
The Supply Chain market, like the vast majority of others, is undergoing a process of adaptation to new technologies .
Software and tools are already becoming more present in the different areas that make up the supply chain.
No wonder some authors call the current moment Supply Chain 4.0 , due to the implementation of solutions such as the internet of things , big data and artificial intelligence linked, above all, to logistics.
In other words, digitization is a path of no return and the professional who wants to work in this sector needs to adapt to this new reality.
Technology has also made the market for the segment grow.
If previously those who wanted to work in the area only had the most traditional companies to work with, nowadays, with virtual commerce, the range has expanded.
Another change that is on the horizon is the search for new logistical modes that are more economical and at the same time agile and accurate.
Interpreting these numbers, it is easy to conclude that logistical expenses weigh both on corporate finances and on the national economy as a whole.
Supply Chain: Salary
All these innovations in the sector added to the relevance of the function make the positions related to Supply Chain one of the most valued within organizations .
According to the Compensation Study , carried out by the consultancy Michael Page, positions linked to supply chains are on the rise and hiring must occur at the most different levels , from the bottom to the top of the hierarchy.
Regarding salary, the survey assesses the type of position, the professional’s experience and the size of the business.
For example, a junior supply chain analyst working in a small company earns, on average, R$3,300.
On the other hand, a coordinator working in a multinational can earn up to R$8,000.
Below is the average salary for other Supply Chain positions:
- Supply Chain Director: BRL 40,500
- Supply Chain Manager: BRL 20,500
- Petrochemical logistics director: BRL 36,500
- Manager of transport of goods and consumption: BRL 25,500
- National retail and e-commerce operations manager: BRL 22,000
- Demand planning manager in the pharmaceutical sector: R$ 21,500.