What is Supply Chain Management?

In any industry, effectively managing the flow of product from the primary producer to the customer is important to success. But in the world of fresh produce, it’s not just important…it’s critical. When you are dealing with highly-perishable products, you can’t afford any inefficiencies that increase losses.

Because of the short shelf life of fruit and vegetables, food loss is already a huge problem. No less than 45% of all fresh produce is wasted each year between the farm and consumer, eating into profit margins and reducing competitiveness.

That makes it super important for managers in the fresh produce business to have a clear understanding of what Supply Chain Management (SCM) is, and how optimising this aspect of the business can yield big improvements in efficiency and profit.

What is Supply Chain Management?

So what exactly is Supply Chain Management, and how can you leverage it to enhance results in your business? As the name suggests, it’s all about managing the entire chain of suppliers who contribute to the success of your business.

A supply chain manager is responsible for coordinating all aspects of the supply chain, including:

  • Planning and strategic supply-chain decisions
  • Sourcing raw materials and services
  • Producing goods and services efficiently
  • Managing delivery and logistics
  • Dealing with returns

According to Salary.com, supply chain managers ‘make recommendations to improve productivity, quality, and efficiency of operations.’

Supply Chain Management is often confused with Logistics. But while Logistics represents a large part of the supply chain, there are many other elements to consider. In the fresh produce industry, for example, the supply chain begins with the primary producer – the farmer.

The supply chain may start with selecting which farmers to deal with, and negotiating prices, quantities and quality. Then it continues with all aspects of transporting the goods, as well as warehousing, cold storage, distribution – until we finally reach the consumer buying the produce in a retail store.

There are two core ideas which underpin the concept of Supply Chain Management. Firstly, it’s important to understand that no business operates in isolation. Every product that reaches a consumer represents the result of a lot of cumulative effort, involving a sequence of organisations. Together, these organisations represent the supply chain.

The second concept is that every business must actively manage the supply chain in their business. It’s a big mistake to focus only on what is happening within the ‘four walls’ of your own business, without regard for how key partners are operating. This can result in weak links in the supply chain, which can have a catastrophic impact on your own business.

It’s also a mistake to think of the supply chain as only relating to the movement of goods from the producer to the consumer. There are also flows in the opposite direction. That’s because all organisations in the supply chain are linked through two different flows:

  • Physical flows
  • Information flows

The physical flows are the most visible part of the supply chain – the production, movement and storage of goods. But the information flows are just as important. These allow the partners in the supply chain to coordinate, arrange orders and control the flow of goods. There is also a chain for the return of unsuitable goods, which flows in the opposite direction to production.

Managing the Fresh Produce Supply Chain

In the fresh produce industry, post-harvest supply chain management is particularly difficult. Mistakes are not forgiven as easily as in most other businesses. A shipment of product that gets mislaid in a warehouse for a week is not an inconvenience – it’s a disaster. The entire shipment may go to waste.

Managing the fruit supply chain represents an even greater challenge. In the tightly-packed enclosed environments of fruit storage, the production of ethylene – the agent that causes fruit to ripen – is a major problem. Without proper management, ethylene can accumulate quickly and cause accelerated decay and waste.

Fortunately, there are ways to mitigate this problem. For example, PostHarvest’s advanced ripening sensor captures ethylene samples from the air, providing warnings when action is required, and facilitating accurate ripening forecasting.

“This technology creates greater efficiency in the fresh produce supply chain,” says Kevin Halliday, Post harvest General Manager at Seeka. “We can predict market-ready condition, control shipping priorities and evaluate potential problems long before they could cause losses. That helps our customers manage their contribution to the supply chain with maximum efficiency.”

The key to effective supply chain management is to look for opportunities to make these kinds of improvements wherever possible. Add a chain of improvements together, and the positive effect can be transformational.

Efficient supply chain management is a vital element in any business, having a direct and measurable impact on sales, revenues, profits, customer satisfaction and much more. In the fresh produce world, especially, it is a management responsibility that you ignore at your peril.

Tim Cook, the CEO of Apple built his meteoric rise to power on his ability to transform Apple’s supply chain. And it’s no accident that under his leadership, Apple became the world’s first trillion-dollar company.

That’s just one example of a company profiting from outstanding supply chain management, and there are many others. So now is the time to evaluate your business supply chain, and see how you can find hidden profits and opportunities for success

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