By CFO Brew Staff
less than 3 min read
Definition:
There’s a lot of talk lately about economic turmoil, a potential recession, and geopolitical tension. One area for CFOs to pay close attention to during these unsettled times is your company’s supply chain. To help you get a better grasp of some of the challenges facing supply chains, we decided to take a deeper look at what, exactly, is supply chain management?
Supply chain management refers to the tracking, monitoring, and directing of the many businesses and internal departments involved with getting a company’s product or service from inception to the end consumer. Supply chain management usually has five steps: planning, sourcing, production, distribution, and returns. A CFO should have insight into the finances of every step in the process and continue to look for opportunities to cut inefficiencies and raise the standards of its suppliers.
What are the main components of the supply chain?
Product lifecycle management is the piece of supply chain management that focuses on the product’s maturation inside a company—overseeing it through development, launch, growth, stability, and decline. A company may want to introduce a new product to its offerings and sunset ones that are no longer resonating. Effective product lifecycle management will create a product that doesn’t bottleneck employees, connects with customers, and outperforms competitors.
What is supply chain planning?
This is the process of identifying how a company’s goods are turned from a raw material into a product. Where do the raw materials originate, what company transports them to the manufacturer, how are the pieces assembled and then distributed to the consumer? For some products this might also include return logistics. Supply chains can get extremely complex. For example, the average car has 30,000 parts, each with its own supply chain. While a CFO might not need to know the ins and outs of each one of those pieces, they should have a good idea of the flow and the critical players.
What is order management?
Another nuance in the ever-expanding supply chain folder is tracking orders from creation to fulfillment. When a customer buys a product either online or in-store, order management ensures that the product gets delivered. Many order management systems are also connected to inventory tracking, so businesses have visibility to the amount of product available, where that product is being stored, and if/when it’s shipped out to the customer. Losing track of customer orders results in unfulfilled orders and unhappy customers.
