How to create a modern supply chain management system for your company: A step-by-step guide

19 Jan, 2023
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modern supply chain management system

Creating a modern supply chain management is essential for brands. Companies need to implement methods and strategies that ensure authentic goods arrive in the hands of end-users on time and in the quantities required.  Unfortunately, achieving this objective has proven challenging with existing technology. Firms struggle to effectively monitor and manage complex supply chains in today’s global environment, leading to brand damage, unhappy consumers, and product quality issues.

This page explains how to create modern supply chain management for your brand step-by-step, helping you avoid the issues above. You’ll find out why effective supply chain management is critical and how to use technology to improve it.

What is a supply chain?

A supply chain is a system of interacting elements for distributing goods from suppliers and manufacturers to the final destination. Today’s supply chains are highly complex, spanning multiple countries, companies, transport methods, and processes.

All supply chains move goods through several stages from a supplier to an end-consumer. Consumers can be members of the general public, companies, non-profits, or government organizations.

What is supply chain management?

Supply chain management is a process that oversees the flow of goods from suppliers to end consumers. Typically, it involves transforming raw materials into a final product, comprising the “supply side” of a business’s operations.

Supply chain managers oversee everything from information systems to product development and bills of lading. Proper management allows companies to reduce costs, deliver goods to customers faster and improve information gathering for business intelligence purposes, which ultimately translates into customer satisfaction. Focus centers on internal production requirements, distribution channels, in-house and external inventories, demand forecasting, and sales.

Most firms break supply chain management down into five elements:

  1. Planning – figuring out how to meet customer and manufacturer demands
  2. Sourcing – building robust relationships with suppliers and working with them to procure raw materials at the right time
  3. Manufacturing – dividing production tasks into sub-tasks and then predicting and managing how they will interact with distribution channels and customer requirements
  4. Delivering – shipping goods to end-users through various channels
  5. Returning – accepting defective, faulty, or unwanted products, usually for resale

Why is supply chain management important?

Supply chain management is critical because it helps businesses meet their objectives. Properly implemented, it makes firms more profitable and sustainable.

How do executives prioritize supply chain management

Executives prioritize supply chain management for the following reasons:

  • Improve company profit margins by reducing the cost of procuring and distributing products to end-consumers
  • Boost customer service by reducing the risk of delayed shipping or shortages
  • Eliminate the risk of oversupply or high inventory that can push up warehousing and distribution costs
  • Cut the number of lawsuits and recalls due to defective products
  • Enhance brand image in local markets
  • Improve product quality by enhancing manufacturing processes and aligning them with distribution requirements

Types of supply chain management systems

Companies adopt several supply chain management systems to facilitate their business objectives. Which they choose depends on their goals, constraints, and brand strengths.

  • Efficient management systems. This form of supply chain management usually arises in industries with low-profit margins. Firms adopt strategies enabling them to minimize costs while fulfilling large order volumes.
  • Flexible management systems. Companies operating in seasonal markets prefer flexible management systems. These let them adapt to high demand when necessary and then reduce their expenses substantially at off-peak times.
  • Fast management systems. Rapid management systems emphasize the rapid turnover of products with short life cycles. Companies try to generate as much money as possible before the trend ends. Then, they move on to the next cycle.
  • Agile management systems. Agile systems work well in industries where firms face unpredictable demand for products. Demand forecasting and supply chain integration help them pivot from one set of goods to another without incurring high waste- or inventory-related costs.
  • Continuous flow management systems. Continuous flow management systems are a traditional approach used by mature firms in established industries. Suppliers produce and distribute goods identically every time, reflecting constant consumer demand.
  • Custom models. Lastly, some firms adopt custom management systems. These usually mix and match the approaches described above. These are popular in highly complex industries, such as aerospace manufacturing.

Supply chain automation through robotics and AI

Supply chain automation through robotics and AI use cognitive or physically instantiated systems to perform rote tasks previously done by human operatives. The hope is that such systems will reduce supply chain expenses and enable companies to operate more efficiently.

Examples include: Supply chain automation

  • Computer vision robots that can identify products in warehouses
  • Robots that move goods from storage areas to packing and distribution areas
  • AI that can incorporate multiple data streams to better manage the supply of goods
  • Machine learning-powered software that can predict problems, such as shipment issues, labor strikes, and demand spikes/troughs
  • Co-bots to improve manufacturing accuracy and speed
  • Optical character recognition to quickly scan, upload, and record documents compliantly

Supply chain visibility through tracking and tracing

Companies are also investing in technology that lets them track and trace shipments as they make their way through the supply chain. Such technology enables them to demonstrate provenance to end-consumers better.

Traditionally, supply chain firms tracked goods using barcodes or QR codes. Technicians scan shipments at each checkpoint and then feed information to a central database.

Today, firms are developing more robust solutions that are less prone to fraud. These systems leverage near-field communication (NFC) technology and blockchain to prevent fakes. Technicians read tamper-proof NFC identifiers applied to single products or higher packaging levels at each stage of distribution, uploading information to a blockchain ledger and creating a permanent and tamper-proof record of a particular shipment’s status, location, and destination.

What is a modern supply chain management system?

Traditional supply chains management focused on collecting raw materials, distributing them via suppliers to manufacturers, and then sending them to consumers. Supply and provision were the most critical factors. However, the complexity of modern supply chains is radically different today compared to the past, leading to substantial evolution in the logistics industry.

Modern systems concentrate on meeting more of the needs of customers in general. For example, managers focus on adding value to the final product, whereas traditional setups only concentrate on distribution.

Modern supply chain management (SCM) also uses more advanced technologies to enable firms to operate more flexibly. Integrations help firms keep products safe while facilitating the flow of goods in reverse.

Lastly, SCM emphasizes the value of building collaborations, partnerships, and alliances. Supplies, companies, and trusted brands work together to deliver according to consumers’ needs. This approach enhances their ability to import and export goods from more international destinations.

Why does your company need a modern SCM system?

Companies need modern SCM systems because of the changing nature of global supply chains. Old-fashioned methods don’t work because consumer demand is far less predictable than in the past. Tastes and trends change rapidly, and supply chains are more likely to encounter disruption because of emergent “poly-crises.” Moreover, fake goods are endemic because of a lack of supply chain oversight, leading to brand damage and consumer harm.

How will a modern supply chain system help you?

Adopting a modern supply chain can help you in the following ways:

  • Improved collaboration with suppliers – long-standing partners may be more willing to accommodate temporary cash flow delays and assist you if you are making mistakes.
  • Better quality control – modern supply chain management gives you more oversight over producers, assemblers, and packaging suppliers. This approach lets you identify problems in the system earlier before they impact consumers.
  • Improved visibility – advanced track and trace technology let you guarantee the provenance of goods when they arrive at their destination.
  • More agility – modern SCM makes it easy to adjust your business model following changes in demand, supply, or the wider environment.
  • Improved cash flow – enhanced quality control and greater visibility over stock levels improve your ability to control costs.
  • Reduced risk – reduced risks by giving you end-to-end visibility of goods as they make their way through the system.

What are authentication systems?

Authentication systems are technologies that aim to verify the legitimacy of users and products. Most systems check if credentials match those already entered into a secure database of authorized users.

In supply chains, the principles are the same, even if the applications work a little differently.

What are the 3 types of authentication?

Systems can verify authenticity using the following methods:

  1. Knowledge-based methods – passwords, PINs, and security questions
  2. Possession-based methods – hardware tokens, RFID devices, smartphones, ID cards, and smart cards
  3. Inherence factors – fingerprints, facial recognition, retinal scans

Supply chain industry managers are most interested in possession-based methods to authenticate products. That’s because suppliers and manufacturers can adhere these items to the products they distribute.

What are the 4 methods of authentication?

The four methods of goods authentication include:

  • Overt authentication. This method prints 2D codes, serial numbers, or QR codes onto labels that suppliers stick to products. It is currently the most popular method due to its reduced implementation cost, ease of use and familiarity in the industry. It is however the system that is more prone to forgery as visible codes, number and QRs can be easily copied.
  • Hologram-based authentication. This method involves applying difficult-to-forge holographic stickers onto items to indicate their authenticity. However, it remains mostly aesthetic, even after many years since its initial use.
  • RFID-based authentication. This method involves placing RFID tags on products to identify them instead of standard barcodes. Premium tags are tamper-proof and, therefore, suitable for authentication.
  • Blockchain-based RFID/NFC authentication. The most advanced authentication methods use a combination of RFID and blockchain authentication methods. These prevent anyone from tampering with the physical product or its supply chain history. Plus, adopting NFC tags instead of RFIDs will even allow end-customers to directly authenticate products prior to their purchase, via a simple tap of their smartphones.

Implement a physical-digital seal for raw materials and semi-finished products at the initial stage of supply chain tracking

Companies can improve their supply chains dramatically by implementing a physical-digital seal for raw materials and semi-finished products. These methods allow the creation of a digital twin to run alongside a physical product.

Firms pair a non-fungible token with a unique physical product, using processes that follow widely accepted standards for digital collectibles. These systems can then facilitate ownership transfer of the physical product from one supplier to another with a backup blockchain-based NFT transaction record.

Implement a physical-digital seal for the final product

Implementing a physical-digital seal for the final product follows a similar process. However, this time, the digital twin passes permanently to the end consumer. They can then prove the provenance of the item if they decide to sell it in the future.

The technology is perfect for vintage wine collectors, expensive perfumes, luxury watches, premier high fashion, whiskeys, fine spirits, and other luxury/collector’s items. It eliminates the need for end-consumers to keep physical authenticity certificates permanently or maintain relationships with vendors.

How to secure data using metaverse and blockchain in supply chains

The digital transformation of the supply chain is critical for preventing fraud and counterfeiting. Fake products entering the system damage brands, reduce trust, and crater demand.

However, blockchain supply chain technology has the potential to prevent this. It provides a permanent, immutable ledger nobody can change, recording the progress of goods as they make their way through the supply chain. Operators cannot reverse transactions, and the possibility of fraud or hacking is remote. And at the same time, buyers get enhanced transparency, increasing their confidence in goods and services.

Blockchain-enabled supply chains work by tracking the progress of goods through every stage in the supply chain. Step one begins by verifying the producer of the good is legitimate. Once confirmed, the good enters the supply chain with a seal of approval. Step two involves tracking goods through every stage of the supply chain, from production and assembly lines to retailers. Firms can ensure nobody tampers with their products and use blockchain-based smart contracts to ensure nobody fiddled with them during transit. Agricultural users can use the technology to verify farm-to-plate food promises.

The potential of this supply chain strategy to save businesses money is enormous. Many supply chains are overly costly and have dozens of middlemen. This technology can potentially eliminate that by providing brands and operatives with access to an open-source system that tracks goods without the need for trusted third parties.

Authena, which is an expert in authenticity and tamper-proofing of products and digital assets, will help throughout the process of securing the supply chain against tampering.

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