Supply chain management
Reimagine supply chain as a digital network that operates in perfect harmony, so it’s better for people, the business and the planet.
What is supply chain management?
A supply chain transforms raw materials and components into a finished product that’s delivered to a customer. It is made up of a complex network of organizations and activities, such as raw materials suppliers, manufacturers, distributors, retailers and the customer.
Supply chain management is the orchestration between these networks comprising procurement, management and storage of raw materials and manufacturing, as well as the moving, delivery, and storing of finished goods and after-market services to create maximum efficiency, lower cost and net value.
Supply chains: From linear to network
To understand the importance of supply chains management, it’s worth first thinking about the importance of a supply chain at its most basic level.
Traditional supply chains follow a linear progression. The output of one step is typically the input of the next step. For instance, suppliers must send raw materials to the manufacturer before the products can be made. If there’s a problem at any step, the entire linear chain is disrupted.
Today’s supply chains, however, are more complex than linear models—they’re sophisticated supply networks that are more flexible and efficient. This helps meet customer expectations for a wide selection of customized, sustainable products and fast deliveries that meet individuals’ specific needs.
Accenture CEO Study finds supply chains are now a major part of the CEO's environmental focus to unlock net zero emissions.
The future digital supply chain
The supply chain is no longer just an efficient maker and mover of goods; it’s now required to be a principal driver of business growth. Resilience is also critical, as future supply chains must manage ongoing disruptions. Sustainability is vital, too, so that supply chains not only address the concerns of investors, board members and governments, but also make a positive contribution to society through achieving zero waste, building circular processes and building trust.
Why? Disruption is the new reality. Technology is advancing. Customer demands are evolving. Complexity and uncertainty are increasing risk. Supply chain management is key to solving this conundrum—and it touches everyone, everywhere.
Supply chain is now a principal driver of business growth.
The basic components of supply chain management
Supply chains vary by company and industry. But at their core, they comprise several interdependent disciplines and, at a high level, commonly contain seven basic components:
- Engineering: Creating a new product that customers will want
- Planning: Anticipating and optimizing events through visibility within every step of the supply chain
- Sourcing and Procurement: Identifying and buying the components that make up a product, with the aim of ensuring quality and reliability at the lowest cost
- Inbound Logistics: Handling the transportation of goods into a business
- Manufacturing: Making enough products to satisfy demand and maintain target inventory levels
- Fulfillment and Delivery: Getting a product to the customer as quickly and economically as possible
- Service Management: Maintaining or fixing a product to ensure customer satisfaction
From Engineering to Service Management, each area’s output is the input to the next—each link relies on the others to form a strong supply chain. For example, Sales and Operations Planning can provide real-time sales results to inform product innovation that drives repeat business. In addition, Procurement must source and buy the right parts and get them to the right plant in time to meet production schedules. And products must be made and shipped on time to ensure that customers get what they want, when they were promised.
Intelligent supply networks are similar, but they have one key difference: They leverage digital tools and technologies to optimize the supply chain and provide visibility across the ecosystem to deliver deeper insights and greater value, more quickly. This shift has a knock-on impact on the seven core components of supply chain management, and the skills that each requires.
This shift has a knock-on impact on the seven core components of supply chain management, and the skills that each requires.
A look at current supply chain sub-disciplines
Each discipline within supply chain management must transform to meet the needs of the future. That’s not just our opinion—it’s what supply chain executives told us as part of our TomX Technology Vision 2021 research, which explored technology trends.
Effective supply chain management strategies
Right now, many companies’ supply chains are built on dated, legacy technologies. They can’t support end-to-end visibility or real-time decision-making, meaning they struggle to deliver strategic business value. They’re essentially analog machines trying to solve problems in a digital world. The result? Slow response times, waste, conflicting priorities between functions, delays and rigidity. What’s more, companies struggle to meet increasingly granular customer needs.
Furthermore, traditional supply chain organizations usually focus on optimizing a particular aspect of the supply chain—not all of it. Instead, organizations should share data across silos and optimize along the entire value chain.
Digital transformation of supply chains
To address these challenges, companies should create intelligent supply chains based on data, analytics and AI. These, along with digital twins, are among the top technologies that supply chain executives are looking to deploy in their organization. Enabling and optimizing them all, however, starts with the cloud.
Operating in the cloud is critical because it allows companies to process huge amounts of data—from virtually unlimited sources across the entire supply chain—at speeds and volumes never before possible. Deeper analysis of more data, faster, means developing critical business insights and smarter decision making. This includes gaining the ability to reconfigure how people work, and gaining the agility to respond quickly to new insights that the data generates. Along with being more powerful, simple and flexible, the cloud is also more affordable. This opens up endless possibilities for improving and optimizing the supply chain, particularly in terms of building in resilience and ensuring responsible operations.
There are additional benefits, too. When companies transform their supply chain organization, the focus shifts from driving profitability to delivering value across growth, sustainability and trust. Along with driving profits, the supply chain becomes instrumental in positively impacting the planet and society alike.
Digital technologies and data lay the foundation to make supply chains customer-centric, service-oriented, self-learning, intelligent and agile. There are five keys to executing an effective intelligent supply chain strategy:
This helps build an intelligent supply chain that improves customer experiences, increases competitive advantage and drives profitable growth.
New technology means big changes to existing supply chain roles
Sustainable supply chains
Supply chains generate around 60% of all carbon emissions globally. Companies that are serious about sustainability are working hard to make their supply chain networks more responsible and resilient.
There are many opportunities to increase supply chain sustainability, including:
- Product design: Developing products with sustainability in mind.
- Planning: Reducing waste by accurately matching supply and demand.
- Sourcing and procurement: Making sure suppliers follow ethical and environmentally friendly practices, and ensuring transparency across the entire supply chain.
- Manufacturing: Making production more efficient to reduce waste and energy consumption, and more responsible by using ethical labor practices.
- Logistics: Optimizing distribution and transportation to reduce fuel consumption and emissions.
Greenhouse gas (GHG) emissions are categorized into one of three different scopes. Scope 1 involves GHG emissions directly from an organization’s owned sources; scope 2 involves indirect GHG emissions; scope 3 emissions are caused by an organization’s value chain, but not owned by the organization. Reducing carbon emissions can occur all the way through the supply chain.
Companies that find new sources of value at the intersection of digital technologies and sustainability are 2.5x more likely to be among tomorrow’s strongest-performing businesses.
We help clients create enduring change by reimagining tomorrow’s supply networks to positively impact business, society and the planet.
Join the team
Meet several of our supply chain leaders from around the world. There’s never been a better time than now to help solve business and national issues and be part of supply chain transformations. Learn more.
Supply Chain & Operations People of Change
Frequently asked questions
Successful supply chain leaders can better anticipate and adjust to shifts and disruptions in the market. They maintain high levels of customer satisfaction because they have a holistic view of their service levels, are sustainable, are responsible and create trust through data that helps generate actionable, predictive insights. Once companies migrate their systems and applications, and gain the ability to process massive and diverse data sets from across all functions, they quickly experience the erosion of organizational silos as data is shared and acted upon more intelligently and with greater speed and accuracy. Companies can become even more informed by using technology to build digital twins of their supply chains. These virtual supply chains allow companies to model and simulate disruptions or changes, as well as identify ways to improve supply chain performance before implementing those changes in the physical world.
There are two types of supply chains: Reactive and Data-Driven. Reactive supply chains make operational improvements based on guesswork or imitating competitors. A Data-Driven approach, however, helps every function within the supply chain, including even best-in-class manufacturing operations find new ways to improve efficiency.
Supply chain management involves five main functions: engineering, planning, sourcing, fulfillment, manufacturing and aftermarket services. For example, supply chain management helps ensure vaccines are manufactured and delivered safely and on time. It helps retailers maintain adequate stock levels of critical supplies. It directs recyclable products to the right facilities instead of landfills. It enables the ability to feed billions of people around the world. When supply chain management is truly effective and optimized for flexibility and efficiency, it makes coping with uncertainty and responding rapidly to ever-changing demands less of a challenge, and more "business as usual."
The characteristics of a good supply chain are visibility, cost reduction, growth/value, responsible/sustainable business management, manage enterprise and a digital core.
Through 2024, 50% of supply chain organizations will invest in applications that support artificial intelligence and advanced analytics capabilities, and run with cloud computing. The COVID-19 pandemic amplified the need for supply chain organizations to seek tools that help them make better and more informed decisions, faster. New digital supply chains will be based on a flexible, asset-light model that places customers firmly at the center so they can anticipate and withstand disruption, as well as support environmental, social, governance and other sustainability practices. Companies will be able to serve diverse customer segments through multiple agile and responsive supply chains based on a network of shared assets. Ecosystems partners and digital technologies will be at the heart of this shift in supply chain planning, all the way through to aftermarket services.