Blog What are the 5 key areas of supply chain management?

What are the 5 key areas of supply chain management?

Supply chain management is the management of the flow of products and services and comprises all processes that transform raw materials into finished goods. It involves the active streamlining of a business’s supply-side activities in order to optimise consumer value and gain a competitive advantage in the market.


Improvements in productivity and efficiency can have a direct impact on a company’s bottom line. Good supply chain management keeps companies out of the limelight and away from expensive recalls and litigation. In supply chain management (SCM), the supply chain manager coordinates the logistics of the supply chain’s five components.


Five Key Areas of Supply Chain Management

  • 1. Planning

    For optimal supply chain management results, the process typically begins with planning to match supply with customer and manufacturing demand. Companies must foresee their future requirements and act accordingly. This applies to the basic materials required at each stage of production, equipment capacity and limitations, and personnel requirements throughout the supply chain management procedure. Often, large organisations rely on ERP system modules to consolidate data and generate plans.

  • 2. Sourcing

    Strong relationships with suppliers are crucial to the success of supply chain management processes. Sourcing entails collaborating with suppliers to procure the primary materials required throughout the production process. A business may be able to plan and collaborate with a supplier to procure products in advance. However, various industries will have distinct sourcing needs. Generally speaking, SCM procuring entails ensuring: - The basic materials satisfy the required manufacturing specifications for the production of goods. - According to market expectations, the prices paid for the products are reasonable. - The vendor has the ability to deliver emergency materials in the event of unforeseen circumstances. - The vendor has a track record of delivering timely, high-quality products. - When manufacturers work with perishable products, supply chain management is of the utmost importance. - When procuring products, businesses must consider lead time and the extent to which a supplier can meet those requirements.

  • 3. Manufacturing

    At the core of the supply chain management process, the company transforms natural materials through the use of machinery, labour, or other external forces. This final product is the ultimate objective of the manufacturing process, although it is not the final phase of supply chain management. The manufacturing process can be further subdivided into tasks like assembly, testing, inspection, and packaging. During the manufacturing process, a company must be aware of waste and other controllable factors that may result in deviations from the original plan. For instance, if a company uses more raw materials than planned and sourced for due to a lack of employee training, the company must correct the issue or revisit the earlier stages of SCM.

  • 4. Delivering

    Once products have been manufactured and sales have been finalised, a business must get the products into the hands of customers. Distribution is frequently viewed as a contributor to brand image, as the consumer has not yet interacted with the product prior to this stage. Strong SCM processes enable a company to deliver products in a timely, secure, and cost-effective manner. This includes having a fallback or a variety of distribution methods in case one mode of transportation is temporarily unavailable.

  • 5. Returning

    Support for product and consumer returns is the final phase of supply chain management. It is terrible enough that a customer must return a product; it is even worse when the return is the result of an error on the part of the business. This return process is often referred to as reverse logistics, and the company must ensure it has the capacity to receive returned products and correctly assign refunds. Whether a company is carrying out a product recall or a consumer is merely dissatisfied with the product, the transaction must be corrected. Many individuals view consumer returns as an interaction between the client and the company. However, inter-company communication to identify defective products, expired products, and non-conforming products is a crucial component of consumer returns. Without addressing the root cause of a customer return, the management process has failed, and future returns are likely to continue.