Why supply chain management is more important than ever
What is logistics and supply chain management?
Supply chain management (or SCM) has always been key to industry operating smoothly, particularly when businesses see rapid growth. However, the pandemic has emphasised just how important this function is. Many companies rely on global supply chains so when borders are shut, factories closed, or regular freight schedules are interrupted, this creates issues within the entire supply chain network.
Logistics and supply chain management includes the procurement, storage and dispatch of goods. This can range from raw materials to finished products ready for retail. Each supply chain is often part of a larger supply chain. So, for example, a wholesaler that builds furniture will have clients like department stores, and the end user for a department store is a customer who may be shopping in-store or online. Either way, it is likely that the furniture will need to be delivered, which then requires logistics to make sure that the right item is delivered to the right address on the right day in the most efficient way possible. When considering the management system for all these processes, the aim is to make it as streamlined and economically viable as possible in order to operate at a profit. This is referred to as the value chain.
Why is supply chain management important?
All of this is important because ultimately, retail is reliant on providing a satisfying customer experience which builds loyalty, keeping companies in business. Supply chain planning became even more vital during nationwide lockdowns because of coronavirus. Online shopping orders increased and for most businesses, they were the only revenue stream while bricks and mortar shops were closed. Even supply chain leaders could not have anticipated this in their forecasting, so it was a real test of business resilience and risk management.
Companies like Amazon which had already implemented automation and machine learning were at an advantage but keeping up with customer demand and sourcing products still put pressure on supply chain performance. Companies that had not optimised their online operations had to adapt rapidly, and for some it was a make-or-break situation causing many businesses to go into administration.
There are multiple stakeholders involved in a supply chain from start to finish, so decisions made by supply chain managers affect everyone at every stage. This is known as a supply chain ecosystem. Likewise, if there are issues sourcing raw materials at supplier level, lead times will be put back for everyone. In healthcare, for example, not receiving medical equipment on time can be a matter of life-or-death so it is vital that supply chain performance is high. When there are disruptions to the production cycle, real-time data becomes crucial.
Sustainability and how suppliers have an impact on the supply chain
Suppliers have a moral and social responsibility to build sustainability into their sourcing of raw materials and make sure that workers are treated ethically. Initiatives like the Forest Stewardship Council (FSC) and the Better Cotton Initiative (BCI) offer certification that materials have been sourced responsibly. This helps suppliers in what can be an increasingly complex marketplace to give the customer reassurance that the end product has been produced in a reliable, environmentally friendly way. Historically, supply chains looked exactly like what they sound like – a chain. They were straight line models which ran from supplier to end user via the manufacturer, the warehouse, and the shipping method. Now, the chain is more like a network with the manufacturer in the centre and multiple tiers of various stakeholders clustered around.
Cotton is a prime example of a complex supply chain as it is sourced from across the world from countries like India, Australia, Turkey and Mozambique to name just a few. Because of this, it is very difficult to trace the origin of the cotton used in clothes manufacturing, and its journey from yarn to fabric to garment. The Better Cotton Initiative therefore uses a credit system because along the supply chain, conventional cotton gets mixed in amongst the material. The focus is on providing farmers with knowledge of water and soil management, while reducing the use of chemicals and supporting the ecosystem. Making BCI cotton more attractive to the retail market because of its credentials puts pressure on the industry as a whole to improve its standards.
Climate change has affected agriculture and forestry, so natural raw materials increasingly require sustainable methods of farming and harvesting and are subject to seasonality. This can also push up prices at source and so impacts retail prices. Some customers may be aware of these pressures, and others not, so supply chain managers must work with sales and marketing to communicate this in ways that are easily understandable.
Customer expectations are high as a result of being able to purchase almost anything at the best price, and in most cases, have it delivered the next day. In some ways, highly effective logistics management has created its own problem in setting the bar so high. The pandemic has demonstrated that globalisation has great advantages for international business but that when that is unexpectedly halted, we do not always have local suppliers that fill the gap. This is a prime example of how business processes may need to be revised, particularly as the UK continues the process of leaving Europe as well.
Are supply chain jobs in demand?
Because of the notable changes in how we do business across the world due to coronavirus and beyond, supply chain managers and experts in logistics are certainly in demand. Business is competitive by nature and so there will always be opportunities to improve supply chains. The emphasis has traditionally been on shorter lead times and cheaper prices, yet in the future, sustainability and closed loop systems will be at the forefront.
More employers are looking for graduates and professionals with specific degrees in logistics or supply chain management due to the increasing number of world events affecting the global supply chain. Key skills needed are accuracy in planning and forecasting, as well as ability to monitor market trends and update the operations management of the business in an agile manner. Even once qualified, to remain in demand, supply chain professionals must continually develop their knowledge and keep up with changes to help their organisations adapt accordingly. Webinars are a good resource for staying up-to-date with what is happening in the world and how this directly affects supply chains. Social media is also more frequently being used as a tool both to gather information about changing conditions that impact the supply chain and to communicate these issues to stakeholders up and down the chain.
Supply chain management is an exciting and challenging field to work in, and one where there is great potential for innovation in supply chain strategy and improving management systems.
Learn more about logistics and supply chain management
The University of Lincoln’s MSc Management with Supply Chain is studied entirely online and part-time, allowing you to study whilst continuing to develop your career.
With modules covering strategic global supply chain management, logistics and operations strategy, and strategic procurement and supply management, this postgraduate degree will set you up for success in this fast-paced and dynamic sector.
Find out how you can become a change-maker in logistics and supply chain management.