Maintaining well-organized logistics and supply chain management is essential to keeping a competitive advantage in many industries. Supply chain management professionals serve vital roles in companies across the economy. And those who work in this field find ensuring the effectiveness of their global supply chain to be a challenging and satisfying profession.
Supply chain managers need to be knowledgeable about inventory control, operations management, third-party logistics, raw materials, transportation, and many other topics. The best logistics and supply chain management degrees will teach all of this and more to train versatile and dedicated supply chain management professionals.
If you want to advance your career in logistics and supply chain management, start by learning the basics of the process, as well as the benefits and challenges of managing transportation and logistics in supply chains.
Benefits of inventory management in supply chain logistics
Inventory management is the process of overseeing and directing the flow of a company’s materials and products. When this is done well, the process efficiently and affordably ensures that needed materials and products are always on-hand. Effective inventory management is the basis of good supply chain management, which takes into account the sources of materials and products and the transportation needed to get them to the desired location.
There are two sides of inventory management:
- Management of the materials or elements that are needed to produce finished products.
- Oversight and warehousing of the finished products ready for sale to customers.
Both of these processes have to be managed correctly to ensure that the flow of products to the market matches up to the demand. Mismanagement of these logistics can be disastrous for a company, as poor inventory management can disrupt cash flow, result in dissatisfied customers, and obfuscate problems in business operations.
Why is proper inventory management important?
Without proper inventory management, it is difficult to satisfy your customers. A good inventory management system helps businesses stay extremely organized and execute the following essential tasks.
- Provide visibility on merchandise. A well-crafted inventory system will allow managers to see immediately which items are where — not only at which warehouse but on which shelf or in which bin. Having this information at their fingertips is especially important if they maintain stock in multiple locations.
- Prevent stock-outs. When managers have good visibility on their product, they are able to see well ahead of time which items need to be replenished in which locations. The inventory system should take transport logistics into account so they can be sure that all restocking occurs smoothly and on time.
- Maintain product freshness. Oversupply of inventory can lead to products becoming outdated or spoiling — a particular concern for agricultural and food-service companies. Inventory management is essential to figure out just the right amount of product to keep and the length of time it can stay warehoused.
- Boost customer satisfaction. Nothing’s worse for a business than being unable to supply a promised product to a customer. Customers are not interested in the details of how products are stored and transported; only that they receive what they ordered when they expect it. Having expert control of inventory and logistics is essential to ensuring that customers are satisfied, and it can help a business build a loyal following.
- Measure business efficiency. Tracking inventory is a key piece of information for monitoring business operations. Maintaining too much inventory ties a disproportionate amount of a company’s operating funds up in warehoused products, while not having enough inventory on hand reduces the number of sales the company makes, reducing the cash flow into the business.
It is difficult to overstate the importance of good inventory management for businesses to thrive. And it’s essential to understand that inventory management is one important element of a larger supply chain management strategy. Maintaining a competitive advantage requires not only inventory control but also managing third-party logistics, sourcing raw materials, and overseeing order fulfillment.
What factors are most important in creating a supply chain management strategy?
Supply chain professionals are in charge of some of the most important and complex aspects of business operations. There are many technologically advanced tools to help them in their work these days, but regardless of what solution they use, they must understand how to coordinate a complicated choreography of supply, transportation, and logistics. Here are some of the most important factors in creating a supply chain management strategy.
- Planning and forecasting. Managers need to put a plan in place for analyzing trends to forecast demand. Plan how to respond to changes in demand and how to anticipate new demands that emerge over time.
- Raw materials sourcing. A key part of the supply chain is the raw materials that go into products. Managers look at various factors in deciding where to source materials, including cost, management, and concerns around social responsibility.
- Third-party logistics. Many businesses use third parties to outsource some aspects of distribution, warehousing, and fulfillment services. It’s important for managers to make sure that they’re working with trusted partners and that roles and responsibilities are clearly defined.
- Inventory management. As discussed above, inventory management is an essential piece of supply chain management. Managers need to keep costs low and efficiency high by staying on top of stocks and frequently analyzing how fast each item is moving off the shelves.
- Shipping and delivery logistics. Customers often have questions about when their orders will arrive, and it’s essential for a company to be able to provide robust information to manage their expectations. Doing so requires having a firm handle on shipping and delivery logistics, even if using third-party shipping and fulfillment services.
To be truly strategic about designing supply chain management methods, it’s best to define one’s goals specifically at the start. What would be a success? Defining expectations helps managers judge whether improvement is needed as the system starts running.
What is the history of supply chain and logistics management?
The term “supply chain management” first appeared in 1982 in a Financial Times story about Keith Oliver, a British logistician and consultant. It quickly became mainstream business jargon, a sign that executives were receptive to a concept that would encompass the variety of business operations that the term gathers under one umbrella: procurement, logistics, sales, and marketing, among other aspects.
Oliver had come to the idea that businesses should look at their chain of supply as a unified whole when he was consulting for a variety of major companies in the 1970s, including Heineken, Cadbury-Schweppes, and Philips. He saw that these companies often suffered from maintaining silos in which their functions such as production, marketing, and distribution were separated and running independently. He figured out what to call his new vision in a steering-committee meeting at Philips, when a manager asked him what all the complicated language he was using really meant.
“We’re talking about the management of a chain of supply as though it were a single entity, not a group of disparate functions,” Mr. Oliver told him.
The manager then suggested that they call the concept “total supply chain management,” instead of the more technobabble-sounding “integrated inventory management” that Oliver’s team was proposing. With that, a new approach to logistics was born.
Supply chain management was at first a rather narrow concept, referring to simply getting a company’s various functions to work together. Over the years, however, the term has expanded to encompass not only the process of supplying finished goods to customers but also, since the late 1990s, methods for reducing costs and creating innovations on the supplier side of the process.
Recently, supply chain management professionals have shifted their focus to applying technological solutions to supply chain management, logistics, and procurement in order to create greater efficiency, open up new methods for business advancement, and better satisfy mobile-first customers.
What are the fundamentals of supply chain and logistics management?
Despite shifting emphasis and expanding scope, the idea of supply chain and logistics management has remained fairly stable and relevant over the years. The fundamental principles have not changed:
- Strategically plan policies for supply chain operations
- Analyze the trade-offs involved in a holistic way
- Work cross-functionally to support the entire system
Oliver came to believe that many companies fail in following this simple rubric, often compromising in various ways instead of innovating new ways of doing things when they meet roadblocks or face constraints.
There are many ways for one to innovate in sourcing raw materials, conducting inventory management, partnering to enable third-party logistics, and managing transportation, and that stays true as ever-more advanced supply chain management software options are developed. Supply chain professionals can excel in the marketplace today by mastering technology and taking new and innovative approaches to the fundamentals of supply chain management.
Challenges of supply chain logistics
Supply chain logistics are by nature complex; the process incorporates a variety of business functions that each have their own internal logic. As we progress in an era of online shopping and next-day shipping, supply chain managers face a number of growing challenges to keep pace with these logistics. According to the PLS Logistics blog, some of the most prominent challenges are:
- Customer expectations. As logistical management abilities and marketing sophistication have increased, customers have come to expect more from the companies they buy from. Logistics need to keep up with these expectations, which include a demand for robust transparency; fast, free shipping; and excellent customer service.
- Transportation costs. Fuel prices are one of the most important factors affecting a company’s supply chain. Rising diesel prices result in increasing fuel surcharges, which affect companies’ supply chain logistics and cut into their bottom lines.
- Risk management. Companies need to adjust as markets, geopolitics, sourcing options, credit availability, and legal oversight change. Shifts like these can present risk to businesses, so planning ahead and managing for potential outcomes is essential. Risk management was a prominent concern even before the trade wars of the last few years, says Ted Stank, professor of Supply Chain Operations and Planning at the University of Tennessee, Knoxville: “There was already a lot of conversation about the need to diversify supply chains. Starting with 9/11, and due to natural disasters as well as global political issues that have occurred, risk management has become a way larger issue in supply chains.”
- Supplier relationships. It’s a challenge working with third-party logistics suppliers since the relationships must be very well thought-out and clearly defined. Setting up these partnerships successfully requires extremely consistent policies and robust communication.
- Regulations. As regulations change at various levels of government oversight, companies can struggle to keep up with compliance. It takes a tremendous amount of effort to simply stay abreast of all pertinent regulations, not to mention managing compliance. Logistics professionals have their work cut out for them on this front.
These challenges make it particularly important for supply chain managers to focus on increasing the efficiency of their processes. Inefficiencies can only make it more difficult to face challenges. Plus, inefficient supply chains are wasteful supply chains. It’s essential to streamline the logistics of this complex web of relationships and tasks in order to make sure a business is not overspending time and energy on bringing its goods to market.
What to avoid when developing a supply chain logistics strategy
When strategizing about how to develop a supply chain, managers must make sure to focus strongly on being proactive. Businesses that think carefully about how they can best design and shift their supply chains for a changing world are likely to have a competitive advantage. Here are a few pitfalls to avoid:
- Neglecting to use data. A common mistake is not collecting and analyzing data that can reveal how to improve supply chain logistics. Data can tell managers a lot about how the supply chain is performing on key performance indicators (KPIs). Data can help them see how to improve and prevent problems instead of just identifying problems that have already started. “Being predictive rather than just reactive is the thing that separates the really awesome companies using data from the rest of them,” says Chad Autry, Professor of Supply Chain Management, University of Tennessee, Knoxville.
- Not planning for risks and disruptions. Managers will want to have a plan in place to deal with disruptions to the supply chain. That way, if something happens in the supply chain, they will be able to deal with it quickly to avoid having the problem or minimize its affect on customers. It’s also important to align the design of the supply chain with the business’s future goals.
- Accepting inefficiencies. Supply chains can become messy as time goes on and the company grows. Maybe the company hung on to too many partners or continues to work with underperforming suppliers. Maybe it neglected to streamline or innovate as its needs changed. Maybe management doesn’t spend time implementing the best software solutions. Inefficiencies creep in, which is okay as long as they’re addressed quickly. But if they’re left to fester, a business is asking for trouble.
- Putting customer service on the back burner. Satisfying the customer is the ultimate goal of your supply chain. So focusing on their needs should never be considered a low priority. It can seem like the demands of keeping the trucks running and the products on the shelves is a more pressing need, but making sure customers are happy is really the purpose of logistics and supply chain work.
- Refusing to be transparent. Supply chain transparency is a major trend these days as government regulations and consumer’s need-to-know demand companies to disclose how they do what they do. The need for transparency is so strong that those companies that refuse to make information about their sourcing and supply chains public often face serious fallout and blowback.
- Not embracing innovation. The supply chains of the future will be digitally-enabled. Increasingly, the global supply chain depends on a variety of technological advancements like delivery automation, artificial intelligence, and blockchain. Businesses that fail to keep up with these fast-changing developments may be left in the dust.
Considering the high level of difficulty involved in creating an effective supply chain and managing logistics in a digital, globalized world, it’s no wonder that an ecosystem of specialized education has grown up to service those interested in this field. There’s tons to learn in order to succeed in logistics and supply chain management; it’s worth aiming for a specialized graduate degree to best prepare yourself to excel in these roles.
Best logistics and supply chain management degrees
There is a lot you can do with a logistics and supply chain management degree, from analyzing KPI data to supervising business operations to maintaining IT systems. Getting advanced training in these fields will set you up to play an essential role in the smooth running of a business, whether you work for a startup or a major corporation.
Why choose logistics and supply chain management?
There are a variety of career paths within the larger field of logistics and supply chain management. Many of them are challenging, well-paid, and good for people who like problem-solving. Common jobs for those who have received a Master’s Degree in Supply Chain Management include operations supervisor, inventory analyst, account manager, logistician, and supply chain manager.
Some of the jobs in this field are expected to grow twice as fast as average U.S. jobs over the next decade. For example, operations specialties manager jobs are expected to grow 10 percent between 2018 and 2028, while the average growth for all occupations in the U.S. is expected to be 5 percent.
Not only are jobs likely to be more available than average in this field, they are also likely to be relatively well-compensated. According to the Bureau of Labor Statistics, several of the jobs associated with logistics and supply chain management can help you pull in a very healthy annual salary, potentially in the six-figure range. Here are a few options that those with a supply chain management degree might pursue:
- Industrial production manager: $103,380
- Transportation, storage, and distribution manager: $100,740
- Operations research analyst: $83,390
- Logistician: $74,600
U.S. News & World Report’s recognizes a number of logistics and supply chain-oriented jobs as among the best business jobs, with operations research analyst weighing in at number 7 out of the 100 best business jobs, and logistician landing at number 17.
The Haslam College of Business at the University of Tennessee, Knoxville offers an online Master’s in Supply Chain Management (MSSCM) that provides comprehensive training in supply chain management, and affords many networking opportunities and educational experiences to help you home in on what aspect of the field interests you most.
As geopolitics, environmental concerns, technological tools, and customer demands shift, businesses will need managers who can think on their toes and embrace a strategic vision for risk-management. Pursuing a career in supply chain management is a wise choice for people interested in solving problems and working at the frontier of innovation in business.