Supply chain management
Learn how a more resilient, sustainable supply chain benefits companies and customers alike.
What is supply chain management (SCM)?
Discover how supply chain management ensures goods and services flow smoothly to consumers.
Key takeaways
- Supply chain management includes five key stages: planning, sourcing, production, delivery, and returns. These stages work together to ensure efficient operations.
- Innovation and adaptability in supply chain management ensure product availability, build resilience, and maintain customer trust in a changing world.
- Redesigning supply chains with predictive tech, AI, and real-time insights improves resilience, sustainability, and competitiveness.
- Supply chain management covers the full process from sourcing to delivery, while logistics focuses on moving and storing goods.
- AI, machine learning, IoT, and low-code apps are transforming supply chains, improving agility and resilience by enabling better predictions, real-time responses, and seamless integration.
The evolution of supply chain management
Supply chain management (SCM) is the process of managing the entire journey of a product or service. This includes everything from sourcing raw materials and manufacturing the product to delivering it to customers and handling returns or recycling.
SCM goes beyond traditional logistics management to include building an adaptable supply chain that proactively and predictively responds to challenges with real-time visibility, agile planning, and business continuity.
Today’s customers expect the availability, tracking, and rapid delivery of products with a swipe of a finger on their phones. When we talk about the supply chain—the process of transforming raw materials into goods and services and delivering them to end users—we’re talking about a process that most modern consumers take for granted.
The global disruptions of 2020 put supply chain management in the spotlight. News feeds were filled with images of empty grocery shelves and shortages of essential items like baby formula, hand sanitizer, and toilet paper. Real-time maps showed hundreds of shipping containers stuck outside overcrowded ports. These events made it clear that businesses need innovation and resilience in their supply chains to meet customer needs.
Competitive businesses have stayed ahead by quickly adopting new innovations and taking a broader approach to supply chain management, going beyond just handling logistics. They recognize that the more resilient they can make their supply chain operations, the more they reinforce customer trust and sustainability for the long run.
Leaders in industries like manufacturing have long understood that managing the supply chain effectively can reduce costs and boost profits for their organizations. More recently, supply chain resilience has been shown to positively impact a company’s bottom line. According to an October 2022 survey by Harvard Business Review Analytic Services, 94 percent of executives surveyed said that supply chain operations are an even higher priority for their organizations today than they were three years ago.1
Even more importantly, prioritizing supply chain management can boost brand recognition and help keep customers satisfied and loyal. For this reason, enterprises across industries are increasing their investments in tech innovations to manage their supply chain. They’re investing in supply chain management services or platforms from cloud providers to make their operations more flexible, secure, and collaborative. These services don’t just help with managing inventory and logistics—they also allow companies to continuously assess and predict the entire supply chain, identifying and improving any weak points.
Get the latest supply chain management news >
SCM goes beyond traditional logistics management to include building an adaptable supply chain that proactively and predictively responds to challenges with real-time visibility, agile planning, and business continuity.
Today’s customers expect the availability, tracking, and rapid delivery of products with a swipe of a finger on their phones. When we talk about the supply chain—the process of transforming raw materials into goods and services and delivering them to end users—we’re talking about a process that most modern consumers take for granted.
The global disruptions of 2020 put supply chain management in the spotlight. News feeds were filled with images of empty grocery shelves and shortages of essential items like baby formula, hand sanitizer, and toilet paper. Real-time maps showed hundreds of shipping containers stuck outside overcrowded ports. These events made it clear that businesses need innovation and resilience in their supply chains to meet customer needs.
Competitive businesses have stayed ahead by quickly adopting new innovations and taking a broader approach to supply chain management, going beyond just handling logistics. They recognize that the more resilient they can make their supply chain operations, the more they reinforce customer trust and sustainability for the long run.
Leaders in industries like manufacturing have long understood that managing the supply chain effectively can reduce costs and boost profits for their organizations. More recently, supply chain resilience has been shown to positively impact a company’s bottom line. According to an October 2022 survey by Harvard Business Review Analytic Services, 94 percent of executives surveyed said that supply chain operations are an even higher priority for their organizations today than they were three years ago.1
Even more importantly, prioritizing supply chain management can boost brand recognition and help keep customers satisfied and loyal. For this reason, enterprises across industries are increasing their investments in tech innovations to manage their supply chain. They’re investing in supply chain management services or platforms from cloud providers to make their operations more flexible, secure, and collaborative. These services don’t just help with managing inventory and logistics—they also allow companies to continuously assess and predict the entire supply chain, identifying and improving any weak points.
Get the latest supply chain management news >
Build a more resilient and trusted supply chain
Join industry experts in this webinar to learn how manufacturers can strengthen their supply chains and improve resilience using cloud technology.
Five stages in the supply chain management cycle
As the name implies, the supply chain is often viewed as a linear process—moving materials and goods along a line from point A to point B. However, viewing the supply chain as a cycle helps emphasize its collaborative, predictive, and adaptive aspects.
There are five stages in supply chain management:
There are five stages in supply chain management:
- Planning.
- Sourcing.
- Producing.
- Delivery and logistics.
- Returns and reverse logistics.
Planning
Supply chain management differs from traditional logistics management because it focuses on strategies to predict demand and design products quickly and accurately. The planning stage relies on powerful technologies to predict demand using AI and advanced analytics.
These technologies help organizations bring products to market faster by centralizing product information. They also ensure accuracy through engineering change management and help manage inventory with real-time supply planning, preventing stockouts or overstocking.
During the planning stage, key performance indicators (KPIs) are established to measure whether the supply chain is cost-efficient and effective, identify problem areas, and meet customer expectations and company goals. Some examples of KPIs in SCM planning include:
These technologies help organizations bring products to market faster by centralizing product information. They also ensure accuracy through engineering change management and help manage inventory with real-time supply planning, preventing stockouts or overstocking.
During the planning stage, key performance indicators (KPIs) are established to measure whether the supply chain is cost-efficient and effective, identify problem areas, and meet customer expectations and company goals. Some examples of KPIs in SCM planning include:
- Cash-to-cycle time.
- Perfect order rate.
- Gross margin return on investment (GMROI).
Sourcing
An SCM approach to sourcing goes beyond merely procuring the raw materials required to manufacture the product. Strategy and cost efficiency are top of mind in the sourcing stage to streamline procurement processes and improve cost management.
Technologies such as vendor collaboration portals and interlinked vendor catalogs give supply chain managers more efficient oversight and control of interactions with suppliers.
Technologies such as vendor collaboration portals and interlinked vendor catalogs give supply chain managers more efficient oversight and control of interactions with suppliers.
Producing
Supply chain management at the production or manufacturing stage emphasizes innovation and sustainability—from product design and source materials to quality assurance during production, packaging, and shipping.
Good supply chain management during the production stage takes advantage of innovations such as automation, collaborative robots (or “cobots”), the Internet of Things (IoT), and mixed reality. These technologies are used to perform predictive equipment maintenance to reduce downtime and to enhance inventory accuracy with automated cycle counts from the production floor.
Good supply chain management during the production stage takes advantage of innovations such as automation, collaborative robots (or “cobots”), the Internet of Things (IoT), and mixed reality. These technologies are used to perform predictive equipment maintenance to reduce downtime and to enhance inventory accuracy with automated cycle counts from the production floor.
Delivering
This stage of supply chain management—from online orders to storage warehouses to shipping (either to distribution centers or physical stores for offline sales)—focuses on consistent and speedy delivery.
Delivery is expedited by optimizing inventory accuracy and automating warehousing operations. This stage can rely on collaboration with third-party logistics vendors such as FedEx or UPS to coordinate and track orders, schedule deliveries, dispatch loads, invoice customers, and receive payments.
Delivery is expedited by optimizing inventory accuracy and automating warehousing operations. This stage can rely on collaboration with third-party logistics vendors such as FedEx or UPS to coordinate and track orders, schedule deliveries, dispatch loads, invoice customers, and receive payments.
Returning
Sometimes called “reverse logistics,” the returns stage completes the links in the chain and allows for the reversal of flow of product back to the producer. This enables organizations to save on costs by minimizing waste and planning for reuse, and even may help create new revenue opportunities, such as subscription or buyback programs.
Benefits of a strong supply chain
While pandemic-era disruptions are fading into memory for many, there’s still an opportunity to redesign the supply chain to be more resilient, sustainable, and adaptable to new challenges, such as geopolitical events and climate-related issues or weather emergencies.
Effective supply chain management helps to:
Effective supply chain management helps to:
- Maximize asset performance by managing the full asset lifecycle, measuring and improving overall equipment effectiveness (OEE), and optimizing asset maintenance—from anywhere.
- Boost innovation by taking advantage of predictive technologies, IoT, mixed reality, and edge computing to eliminate data siloes and get better insights.
- Boost competitive advantage by optimizing and automating order fulfillment using AI and real-time inventory tools.
- Improve visibility of demand, supply, capacity, and inventory throughout the entire supply chain and reduce risks by predicting potential disruptions.
Agile supply chains in manufacturing
Whether it’s healthcare, retail, or energy—all industries can benefit from a well-managed supply chain. One industry that is uniquely positioned to benefit from improved resiliency, sustainability, and flexibility is manufacturing.
A manufacturer’s view of the supply chain is different from other industries, such as retail. Manufacturers have to manage the factories that are making their products—as well as source all the raw materials and parts required to keep their manufacturing equipment and physical structures running. Manufacturers also need insight into demand for their products, so they can make the right products in the right factories to minimize costs and serve their customers.
Manufacturing executives use data from metrics like OEE to minimize changeovers and keep factories running at full capacity. At the same time, supply chain management in manufacturing aims to reduce inventory and adjust to unpredictable demand. Both roles focus on cutting costs, minimizing changeovers, and improving overall equipment efficiency.
The ultimate goal of investing in digital manufacturing technologies is to create agile factories and production plans that are aligned with supply chain objectives. Agile factories respond more nimbly and cost effectively to demand, and supply, volatility to create more resilient supply chains.
Learn how to use data to boost supply chain resiliency >
A manufacturer’s view of the supply chain is different from other industries, such as retail. Manufacturers have to manage the factories that are making their products—as well as source all the raw materials and parts required to keep their manufacturing equipment and physical structures running. Manufacturers also need insight into demand for their products, so they can make the right products in the right factories to minimize costs and serve their customers.
Manufacturing executives use data from metrics like OEE to minimize changeovers and keep factories running at full capacity. At the same time, supply chain management in manufacturing aims to reduce inventory and adjust to unpredictable demand. Both roles focus on cutting costs, minimizing changeovers, and improving overall equipment efficiency.
The ultimate goal of investing in digital manufacturing technologies is to create agile factories and production plans that are aligned with supply chain objectives. Agile factories respond more nimbly and cost effectively to demand, and supply, volatility to create more resilient supply chains.
Learn how to use data to boost supply chain resiliency >
Supply chain management vs logistics
While the terms supply chain management and logistics management are often used interchangeably, clarifying the differences can help in effective supply chain operation strategy and resource planning.
Supply chain management
Supply chain management begins with strategic planning, establishing an operational framework for logistics management. It covers coordinating operations, financing, sourcing, manufacturing, storage, distribution, product delivery, and planning for returns.
Supply chain management:
Supply chain management:
- Involves all stages of the supply chain.
- Strategy-oriented for market competitiveness.
- Builds collaboration between a network of partners, suppliers, manufacturers, business partners, and end users.
- Plans financing and resource allocation.
- Selects appropriate technologies to support the mission.
- Hires third-party logistics vendors or coordinates in-house logistics management.
Logistics management
Logistics management focuses on the specific supply chain stages of delivery and returns—coordinating the flow of inventory from supplier to customer delivery, as well as the reverse flow of returns.
Logistics management:
Logistics management:
- Involves specific supply chain stages of delivery and returns.
- Task-oriented and process-oriented for operational excellence.
- Manages effective flow of goods for inventory and delivery to customers.
- Coordinates the delivery stage, from source to end users.
- Controls the return stage, with reverse inventory flow from customer returns, as well as any reuse and recycling.
Evolution of supply chain technology
A new wave of technological capabilities has changed the supply chain management landscape. These innovations are helping managers, companies, and customers alike reap the benefits of a more agile, resilient supply chain.
Four key areas of digital supply chain technologies are rapidly evolving, making it easier for companies to track, detect, predict, respond to, and adapt to disruptions throughout the entire supply chain.
Four key areas of digital supply chain technologies are rapidly evolving, making it easier for companies to track, detect, predict, respond to, and adapt to disruptions throughout the entire supply chain.
- AI and machine learning—AI, machine learning, and embedded advanced analytics provide algorithms and predictive methods that allow supply chain managers to make proactive adjustments and ensure business continuity. Many of these cloud-based platforms and services, such as digital twin technology, allow supply change management to run simulations to improve decisions, before a disruption occurs.
- Low-code and no-code applications—Low-code and no-code app development solutions provide a way for supply chain engineers to build line-of-business applications and automate business processes quickly and simply, without having to generate a lot of code. Low-code app development helps meet business demand faster, reduces development costs, and helps to coordinate, manage, extend, and connect cloud apps across the supply chain.
- API-driven, composable applications and microservices—In the past, traditional supply chain management relied on costly, rigid ERP systems that worked in isolation and required custom coding. This made adopting new technologies difficult. Today, microservices and API-driven apps offer more flexibility. These modular, composable apps connect systems and allow data to flow seamlessly, creating a more adaptable supply chain that can respond to challenges in real time with improved visibility, agile planning, and business continuity.
- Internet of Things (IoT) solutions—An IoT device is a physical object equipped with sensors and the ability to connect to the cloud via Wi-Fi. In supply chain management, examples of IoT devices include pressure sensors on oil pumps, temperature and humidity sensors in air-conditioning units, and motion detectors in rooms. One common use of IoT in supply chain management is predictive maintenance. These sensors track equipment performance and status, helping to predict when maintenance is needed and identify potential malfunctions. IoT devices can also use digital twin technology to improve service in real time.
Digital twins and the supply chain
Digital twin technology is used in supply chain management to create a digital representation of real-world things, places, business processes, and people. A digital twin uses the cloud and IoT spatial intelligence to create working models of a physical counterpart or “twin” in the supply chain network. This can be a model of any physical asset, process, or environment such as buildings, factories, farms, energy networks, railways, stadiums, and even entire cities.
By creating a digital model that behaves exactly as its physical “twin,” engineers can virtually visualize, simulate, and predict supply chain operations, gaining insights that drive better products, optimized operations, reduced costs, and breakthrough customer experiences.
Learn more about digital twins in supply chain management >
By creating a digital model that behaves exactly as its physical “twin,” engineers can virtually visualize, simulate, and predict supply chain operations, gaining insights that drive better products, optimized operations, reduced costs, and breakthrough customer experiences.
Learn more about digital twins in supply chain management >
Supply chain management and the cloud
With cloud-based technologies changing the face of the supply chain landscape, supply chain managers are embracing data as one of their most strategic resources. The ability to gather and track large amounts of near-real-time operational data from across the network has become as important to their businesses as the raw materials or the logistics vendors that they use to serve their customers.
Supply chain managers look for the capability to collect data and gain end-to-end supply chain visibility. These cloud capabilities help them break down siloes and enable greater supply chain connection, collaboration, and optimization. Ultimately, any company that wants to stay competitive will need to embrace cloud-based solutions with the ability to capture and use real-time data to connect various supply chain functions.2
Supply chain managers look for the capability to collect data and gain end-to-end supply chain visibility. These cloud capabilities help them break down siloes and enable greater supply chain connection, collaboration, and optimization. Ultimately, any company that wants to stay competitive will need to embrace cloud-based solutions with the ability to capture and use real-time data to connect various supply chain functions.2
Supply chain control towers
A supply chain control tower is a not a single technology, but a concept in supply chain management that uses multiple cloud-based and edge technologies such as AI, machine learning, and the IoT.
The concept of supply chain control towers is built on a foundation of data. These cloud-based solutions gather and track large amounts of near-real-time operational data from across the network to provide actionable insights. This complete supply chain visibility helps break down siloes, allowing for better connection, collaboration, and optimization across the supply chain.
Supply chain control towers are used to:
The concept of supply chain control towers is built on a foundation of data. These cloud-based solutions gather and track large amounts of near-real-time operational data from across the network to provide actionable insights. This complete supply chain visibility helps break down siloes, allowing for better connection, collaboration, and optimization across the supply chain.
Supply chain control towers are used to:
- Improve decision making by running “what if” analyses and scenario comparisons.
- Manage supply chains proactively by running simulations of demand and supply changes.
- Identify customer issues and address them quickly with real-time alerts.
- Improve customer satisfaction by collaborating with partners across the supply chain.
Frequently asked questions
- A supply chain control tower is a not a single technology, but rather a concept in supply chain management that uses multiple cloud-based and edge technologies such as AI, machine learning, and the Internet of Things (IoT) to run simulations and improve decision making.
- ERP is a type of software that helps automate and coordinate the flow of data between a company’s business processes. ERP is used in supply chain management to link financial, logistics, operations, reporting, manufacturing and human resourcing in one platform.
- Enhanced visibility is one of the foundational aspects of effective supply chain management. End-to-end visibility across the supply chain is to manage risk through the inevitable disruptions and to be able to anticipate and balance supply with demand. It allows businesses to work more seamlessly with external systems and suppliers—eliminating data siloes, improving quality, and optimizing production. Visibility also helps boost planning agility with real-time data to eliminate stockouts and help keep high-demand items available for customers.
- In supply chain management, collaboration most often refers to the cooperative operational strategy to connect suppliers, customers, and other partners as a means of boosting efficiency and producing value for the end consumer.
Independent firms or parties work together to plan and execute their activities at the different stages of the supply chain. Supply chain collaboration often uses cloud-enabled technologies such as dashboards that can pull data from multiple third-party systems, allowing all collaborators to have a single, global view to improve operational efficiencies. - Digital twin technology is used in supply chain management to create a digital representation of real-world things, places, business processes, and people. A digital twin uses the cloud and Internet of Things (IoT) spatial intelligence to create working models of a physical counterpart or “twin” in the supply chain network. This can be a model of any physical asset, process, or environment.
- Supply chain management refers to managing the entire process of delivering products or services to customers. This includes sourcing raw materials, manufacturing the product, delivering it to the customer, and handling returns or recycling. The goal is to do all of this in the most reliable, efficient, and cost-effective way possible. Supply chain management is an approach that moves beyond traditional logistics management to build an adaptable supply chain that proactively and predictively responds to challenges with real-time visibility, agile planning, and business continuity.
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- [1]A Supply Chain Built for Competitive Advantage. Harvard Business Review Analytic Services, an independent commercial research unit within Harvard Business Review Group. Copyright © 2022 Harvard Business School Publishing. https://1sz1zy8vjl.proxynodejs.usequeue.com//en-us/dynamics-365/blog/business-leader/2022/03/17/total-economic-impact-of-dynamics-365-supply-chain-management/
- [2]Six Trends That Are Shaping Supply Chain Transformation for Manufacturers. ©2022 Microsoft Corporation. https://j0j919hhgn.proxynodejs.usequeue.com/gdc/gdcMIVntW/original
